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1-800-NO-YIELD

Published:

Oct 31, 2020


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Published:

Oct 31, 2020


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Near-zero yields are making it difficult for pensions and endowments to hit the targets they need to meet their future obligations. It’s pushing disciples of the classic investing strategy of 60% stocks / 40% bonds to get more creative.

As an example, the $400b California Public Employees’ Retirement System (CalPERS), which provides benefits for 2m current and future retirees, must earn an annual return of at least 7% to meet those obligations. That’s not an easy task when the safe investments that pension funds usually rely on are paying sub 1%.

Creative CIOs are shifting into assets once considered on the fringes of conventional investing such as single-family rentals, digital assets, supply-chain finance, entertainment royalties, and catastrophe bonds. Institutional investors are now allocating an average 26% of their assets to alternative strategies (up from 11% in 2006).

While Bowie bonds may have pioneered asset-backed royalties for the musician's hits in 1997 (Farewell Major Tom, FTC Newsletter Jan 2016), some of these alternative assets are now investable (at-scale) for the first time through modern data and tech-driven asset managers.

We have no doubt that allocators will continue to seek higher returns via more esoteric asset-backed structures. For asset-managers not willing to get creative (and perhaps skip dressing-up for Halloween), they will have to call 1-800-NO-YIELD and trade “risk-free” government debt.

Portfolio News


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1-800-NO-YIELD


The 40 in 60/40 portfolios is getting wilder and wilder - Rock-bottom yields are making it harder than ever for pensions, endowments and other money managers to hit the targets they need to meet their long-term obligations. As a result, fund managers are now shifting fixed-income allocations to assets once considered on the fringes of conventional investing -- things like whole-business securitizations, entertainment royalties and catastrophe bonds. Read more

Lengthy era of rock-bottom interest rates leaving its mark on U.S. economy - Aging populations, subpar productivity growth and a once-in-a-century global pandemic led the Fed earlier this year to return its benchmark borrowing rate to near zero and to resume large-scale buying of corporate and government securities. The Washington Post explores the implications. Read more

Industry News


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Select Financings


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Wise - San Mateo based embedded banking startup raised $12 million in Series A funding led by E.ventures. Read more


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