Portfolio Manager Commentary

  • Overview, strategy, and outlook: As of March 31, 2017 At the beginning of 2017, the market’s base case was for the Federal Open Market Committee (FOMC) to raise its target rate twice this year, with most participants thinking rate hikes would occur in June and December. Even as economic data continued its improving trend and inflation indicators started to tick up, market expectations were tempered by the considerable uncertainties surrounding the new administration’s impacts on growth and inflation.
  • Overview, strategy, and outlook: As of February 28, 2017 Viva Las Vegas! The Structured Finance Industry Group (SFIG) held its 2017 conference in Las Vegas from February 26 to March 1. The SFIG is an industry association with a large membership, drawing professionals from rating agencies, issuers, dealers, the investing and legal communities, and other participants in the structured finance marketplace.
  • Overview, strategy, and outlook: As of January 31, 2017 With so much going on related to the United States’ periodic peaceful transition of power and all it entails this time around—including, perhaps, a shift in the fiscal/monetary balance as well as a reboot of the country’s global economic and strategic relationships—it feels strange to report that little went on in the money markets in January.
  • Overview, strategy, and outlook: As of December 31, 2016 To no-one’s surprise, money market reform-related topics dominated discussions in our monthly commentaries over the last year, with the U.S. Federal Reserve (Fed) following a close second. About the only break investors received from those two topics were in February, in which we discussed the overall credit environment and retail trends that could affect credits in the coming year, and June, in which we discussed implications for the money markets of the U.K.’s referendum on exiting the European Union—i.e., Brexit; and even then, we couldn’t help but insert a bit of information about reform-related flows!
  • Overview, strategy, and outlook: As of November 30, 2016 With money market reform-related conversions some seven to eight weeks in our rear-view mirror, the short-term markets seem to be settling in and adjusting to their “new normal.” Following the great rotation out of prime funds and into government funds, prime funds continued to leak assets through most of November, though the pace significantly decreased, and even reversed, in the waning days of the month.
  • Overview, strategy, and outlook: As of October 31, 2016 When something as transformative as money market reform occurs, one naturally expects something will mark—or mar, depending on your outlook—the occasion. After all, this reform effort has affected virtually every aspect of the short-term investment markets. The U.S. Securities and Exchange Commission (SEC) required all institutional prime and municipal money market funds to begin transacting with shareholders at a floating net asset value (FNAV) by the fund opening on Friday, October 141. But when the opening bell figuratively rang, nothing happened. It was a day like any other day, with portfolio managers trading and shareholders purchasing and redeeming. It was…ordinary.
  • Overview, strategy, and outlook: As of September 30, 2016 With the end of the third quarter bringing us just two short weeks shy of the U.S. Securities and Exchange Commission’s money market reform implementation deadline, unsurprisingly, the elephant in the room this past month was the same as the previous month. Also not surprisingly, the prospect of reform implementation drove not only investor behavior but also portfolio manager behavior and affected the money markets in a number of ways.
  • Overview, strategy, and outlook: As of August 31 2016 With the passing of Labor Day—and, of more significance here, the Minnesota State Fair—the summer has officially come to a close. Back to school means back to the grindstone for many people. During the summer, activity in fixed-income markets traditionally drops off as traders, portfolio managers, and shareholders all find time to vacation, and this year has been no exception. But while trading in the money markets has been relatively subdued, activity in money market funds has not.
  • Overview, strategy, and outlook: As of June 30, 2016 The decision of voters in the United Kingdom to exit the European Union (Brexit) will begin a lengthy—currently projected at greater than two years—process of negotiations, with uncertain effects for both the U.K. and the rest of Western Europe. The results of the Brexit vote caught market participants off guard, causing a spike in volatility as economic and political outcomes become quite uncertain. And if there’s one thing markets don’t like, it is uncertainty.
  • Overview, strategy, and outlook: As of May 31, 2016 A couple of items on the agenda for June have the potential for making the month interesting. The first is the Federal Reserve (Fed) meeting on June 15, at which point the question of “will the Fed tighten in June?” will be answered. Futures markets over the past month have gone back and forth on the odds of a June rate hike.
  • Overview, strategy, and outlook: As of April 30, 2016 If you Google the date July 14, 2014, for instances of historical or global significance, your search results likely will turn up nothing of note. But for the mutual fund industry, changes to Rule 2a-7—the rule governing money market mutual funds—were proposed on this date by the U.S. Securities and Exchange Commission (SEC) after 4 years of planning and industry input that would change the course of money market funds and the way they have been managed by investment professionals and used by consumers for over 40 years.
  • Overview, strategy, and outlook: As of March 31, 2016 As we discussed in our January commentary, market volatility in multiple asset classes was quite pronounced as market participants struggled with the prospect of slower global growth, the weakened state of the Chinese economy, and commodity prices dampening inflation expectations.
  • Overview, strategy, and outlook: As of February 29, 2016 Although improving somewhat in recent weeks, credit quality has been under pressure, as evidenced by spreads widening significantly since mid-2014. There has been particular weakness in high-yield spreads, especially in the oil and gas sector, and acute weakness with respect to banks, namely certain European global trading and universal banks.
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Contributing authors