SOURCE: Bandon Capital Management, LLC
PORTLAND, OR--(Marketwire - Aug 29, 2012) - A research paper "Fixed Income Investing -- the Dangers of Complacency" examining the risks of the current low interest rate environment and the challenges of a prolonged low or rising interest rate future was released today by Bandon Capital Management, LLC, a Portland, Oregon based alternative investment management firm.
The paper points out the US has been in a declining interest rate environment for 30 years, producing a tailwind for fixed income investors but one with little room left for further decline. At these interest rate levels -- the yield on the 10 year US Treasury recently hit an all-time month end low of 1.49% -- fixed income investors face unique risks which are predominantly unfamiliar.
However, given the recent attractive returns and the flight to safety associated with the fragile global economic environment, money has poured into fixed income mutual funds -- $740 billion from 2009 through 2011, more than 15 times the amount that was invested between 2000 and 2008 ($47 billion)1.
The question of whether recent past results are likely to be repeated is comprehensively examined with examples of the dangers present in today's markets.
"We repeatedly see investors equating fixed income investments with safety which we think is misplaced," said Bill Woodruff, Bandon's Chief Investment Officer. "Like equity markets, bond markets generally do not shift gradually. With markets pricing in what seems like everlasting low growth and Fed easing, even some slight economic optimism may create increasing rates much sooner or faster than the market expects."
"Fixed Income Investing -- the Dangers of Complacency" is the first in a series of three white papers addressing the challenges in today's fixed income markets and the alternatives to traditional fixed income management available to mutual fund investors. Subsequent papers will address long-short debt as a solution, its role in portfolio construction and Bandon's unique approach to the strategy.
A copy of the research paper can be found by clicking here.
1 Source: Investment Company Institute
About Bandon: Bandon Capital Management is a Portland, Oregon based, private investment management firm founded to provide investment solutions to financial intermediaries that deliver non-correlated, absolute returns regardless of market direction. Bandon identifies institutional quality alternative strategies that can be translated and implemented using liquid, transparent securities and delivers these solutions in democratized vehicle structures. Bandon was created to address the underserved demand by financial advisors and their clients for investment solutions that deliver non-correlated, absolute returns regardless of market direction. Bandon is the manager of the Bandon Isolated Alpha Fixed Income Fund (NASDAQ: BANIX), a long-short fixed income mutual fund. Additional information about the company and its products can be found at www.bandonalts.com.