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After studying dividend stocks and interest rates between 1927 and 2013, Timothy Strauts at Morningstar found in that time frame high-dividend stocks had the highest returns of all other equities. “But in the periods of rising interest rates they actually were the worst-performing category, and actually companies that didn’t pay a dividend outperformed by a substantial margin,” Strauts writes. “Although dividend stocks may be a great investment for the long term, if rates rise quickly they may perform poorly.”
How To Pick Social Impact Investments For Your Clients (The Wall Street Journal)
There are four key steps to finding social impact investments — investing that has a social impact and has a financial returns — that work for clients writes Christina Alfonso, founder of Madeira Global in a new WSJ column.
1. “Create an investment mandate” — This involves “helping a client refine their geographic and industry preferences for investments, their risk profile, and their financial and social expectations.”
2. Search for the right investments — “identify suitable investment opportunities and have a conversation with the client about whether it is something they want to pursue.”
3. Figure out how to deploy capital — “Clients can invest by way of debt, equity, impact funds, and even funds of funds. While ultra-high-net-worth clients tend to want to make direct deals, as the marketplace for social-impact investing expands, we’re seeing more opportunities for investors of different economic backgrounds.”
4. “Actively manage the impact investments” — “Ten years down the line, clients should be able to look back and see what the financial and social impact of their investment has been.”
PIMCO Experienced Its 13th Straight Month Of Outflows (Business Insider)
PIMCO’s Total Return Fund, managed by Bill Gross saw a new outflow of $US4.29 billion in May, according to the latest data from Morningstar. This is the 13th consecutive month of new outflows bringing the total to $US59.55 billion. The bond fund has been in the spotlight in part because of its performance but also because of CEO Mohamed El-Erian’s sudden exit.
Recently, some have criticised the Barclays U.S. Aggregate Bond Index for having too heavy a weighting of U.S. government bonds. “The argument is that too much U.S. government bond exposure leads to lower yields, thus hurting investors,” writes Jim Rowley, senior investment analyst in Vanguard Investment Strategy Group (the Agg).
“Regardless of how the sectors are officially classified, market participants determine the amount of compensation they demand for credit and prepayment risk in the form of ‘spread,'” writes Crowley. The spread, as Crowley charts it, shows the difference between the yield-to-worst of the Barclays U.S. Aggregate Bond Index and the yield-to-worst of the Barclays U.S. Treasury Index.
“Yes, the spread fluctuates, and, yes, there was a big spike at the time of the global financial crisis. However, the current amount of spread seems to be around the long-term trend, maybe, actually, a bit higher,” Crowley writes. “As Vanguard has noted before, investment-grade¹ bonds remain a good source of diversification. Low-cost index funds and ETFs that track the Agg are a great way to access that exposure. As for the notion that the Agg is vastly different today than it was in the past? I just don’t get it.”
Wells Fargo Gets $US1.5 Billion Team From JPMorgan (Investment News)
John Bueno, John Raetz, and Noah Robinson, who together managed $US1.5 billion in client assets at JPMorgan Private Client Service Group, are leaving for Wells Fargo Advisors, reports Alessandra Malito at Investment News. “We moved because there was a lot of changes occurring at our former employer, and a lot of those changes weren’t to the benefit of our clients or us as employees,” Bueno told Malito.
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