Capital Markets Archives -

Five Ways to Customize Your Fixed Income Core

April 5, 2022April 5, 2022

Five Ways to Customize Your Fixed Income Core

Avoiding the “Highway Toward the Danger Zone” in fixed income investing.

With interest rates finally increasing from historic lows, the traditional way of thinking about fixed income investing has become a potential “highway toward the danger zone” (my apologies to singer Kenny Loggins and his title song to the movie Top Gun circa 1986).

The following discussion emphasizes why investors need to think about fixed income investing dynamically and to structure fixed income portfolio allocations based on desired outcomes vs. traditional style boxes.

In our firm’s view, not doing so increases the likelihood of your fixed-income portfolio “crashing and burning” leaving you without a parachute to safety.

Capital Markets

Just How Valuable is Tax Loss Harvesting?

April 5, 2022April 5, 2022

Just How Valuable is Tax Loss Harvesting?

Winning by Losing…

No, this is not about winning the battle of the bulge or trimming our waistlines. And yes I know this title may be confusing but in a moment it will all make perfect sense.

The following article was published in the WSJ approximately 2 months ago but at that time our firm was focused on “harvesting” valuable tax losses for our clients, (a service that Conexus Capital Management, LLC provides to our investment management clients at no additional cost) which left little time to distribute this piece by George Mason University Business School’s Prof. Derek Horstmeyer.

But now is the time of the year that 1099s, W-2s, and other tax documents are populating our inboxes and even some mailboxes. Which in turn reminded me that now is the perfect time to touch on this information.

In essence, Dr. Hortsmeyer’s article reiterates what our firm has known and performed for many years. In taxable accounts, offsetting realized capital gains with realized capital losses can boost returns. The referenced article’s analysis not only suggests this to be factual but supports its conclusion with academic rigor. And by the way, for those readers who really want to get granular, an empirical study was performed by professors at MIT and Chapman Universities with the same conclusions.

Capital Markets

Private credit soars 77% as asset class continues to…

April 5, 2022April 5, 2022

Private credit soars 77% as asset class continues to heat up

The risk of being out of touch and out of time…

One of my first thoughts as I was reading through the recent article in “Pension & Investments” regarding private credit was, “does the timing make sense now?”

My second thought bizarrely went to the 1984 hit song Out of Touch by Hall and Oates (more on that to follow). The article highlights the increased capital allocation amongst the country’s largest pension plans to “private credit” (contrasted with public credit aka bonds). This recent trend was and is likely the result of institutional investment professionals needing to generate acceptable risk adjusted results to achieve their target return objectives after a period of historically low interest rates.

Pension plans, like most long term investors, need to make allocation decisions today based on current market conditions that will likely impact their achieving future return objectives.

The risk of not doing so might cause them to look out of touch and leave them out of time(my apologies to pop music duo Daryl Hall and John Oates for my lyrical adaptation).

At Conexus Capital Management, LLC it appears as though the timing is right to consider and investigate an allocation to this growing asset class as well.

Capital Markets

Do Commodities Have a Place in Your Portfolio?

April 5, 2022April 5, 2022

Do Commodities Have a Place in Your Portfolio?

Pork bellies are used to make bacon, which is something you might find on a bacon, lettuce & tomato sandwich…

It’s hard to forget Randy & Mortimer Duke’s oversimplified explanation of commodity investing when speaking to Billy Rae Valentine played brilliantly by Eddie Murphy in the film “Trading Places” circa 1983.

But with the rate of inflation approaching 40-year highs, investors and consumers alike are seeking strategies to offset the debilitating effects of inflation.

The following article wrangles with the concept of how to approach this challenge effectively. The author (Ben Johnson, CFA) sets forth his case why using commodity funds might not generate the desired result despite recent increased investor allocations and commensurate fund flows.

At Conexus Capital Management, LLC, since the beginning of the pandemic, we have successfully utilized these types of commodity investments on a tactical basis. However, it is a complex question that certainly requires more analysis when viewed through the lens of a longerterm strategic allocation.

Analysis which is not quite as simple as a BLT sandwich…

Capital Markets

What Bond Investors Should Do As Interest Rates March…

April 5, 2022April 5, 2022

What Bond Investors Should Do As Interest Rates March Higher

Flashing red lights and what to do about them…

At the time this is being written, Thursday morning March 31, 2022, U.S. bond market yields are flashing, FLASHING RED, in fact. A warning signal of sorts, attempting to alert all those who will pay attention, that either something is amiss or at a minimum that something is aberrant regarding the normal slope of the U.S. Treasury yield curve.

You see, the normally upward sloping yield curve is currently flat when looking at the 2 year & 10 year yields. Even inverted when looking at the 3yr, 5yr, and 7yr yields versus the 10 yr yield.

So there are two questions that investors who manage their own accounts have to ask themselves, “what does this all mean? And what, if anything, are they going to do about it?”

The attached article addresses some of these warning signals and possible steps that we at Conexus Capital Management, LLC have been focusing on and preparing for since the Fed began cutting the fed fund rates to nearly zero in March 2020.

Capital Markets

Understanding Market Downturns

November 19, 2021November 24, 2021

Understanding Market Downturns

Market downturns are an inevitable part of a longterm investing strategy. However, even though market sell-offs are usually anticipated, experiencing a downturn with your own capital, first hand can be an emotionally harrowing experience for the unprepared. Which is why having a thoughtful strategy prior to experiencing market volatility usually increases the liklihood of investing success.

Category: Capital Markets

Five Ways to Customize Your Fixed Income Core

Five Ways to Customize Your Fixed Income Core

Just How Valuable is Tax Loss Harvesting?

Just How Valuable is Tax Loss Harvesting?

Private credit soars 77% as asset class continues to…

Private credit soars 77% as asset class continues to heat up

Do Commodities Have a Place in Your Portfolio?

Do Commodities Have a Place in Your Portfolio?

What Bond Investors Should Do As Interest Rates March…

What Bond Investors Should Do As Interest Rates March Higher

Understanding Market Downturns

Understanding Market Downturns