By New Frontier

Interest rates affect your portfolio through all asset classes, but may do so in different ways. Investors are on edge about rising interest rates today, but sensitivity to interest rates has long been a concern of serious investors (along with all other aspects of portfolio risk).  Duration is the standard statistic used to describe the sensitivity of a portfolio to small cha ...

By New Frontier

Question: U. S. Equity markets are up. Why isn’t all of my money in the S&P 500? Why do I have any exposure to treasuries when everybody knows they are underperforming U. S. equities? At the heart of New Frontier’s investment policy is planning for all contingencies and reducing portfolio risk. It may be fashionable to bet strongly on particular outcomes, but a sensible lo ...

By New Frontier

The universe of investable ETFs has experienced tremendous growth over the over the last 20 years since the launch of the first ETF to over 1,000 investable products.  The vast expansion of choices raises the question: How to choose among so many options?  To vet new ETFs and reconsider ETFs that are currently included in our portfolios, the New Frontier investment committee an ...

Fixed income funds have many important functions in global capital markets.  Life insurance companies may buy long-term bonds to hedge long-term life insurance policies.  Commercial insurance companies may purchase intermediate-term bonds to hedge various shorter-term liabilities.  Pension funds may buy various maturity bond funds to match vested retirement liabilities. Central ...

The Federal Reserve’s announcement of continuing the stimulus program without change surprised many investors and pundits.  The media is much guilty of the hype surrounding the September announcement. In a note sent to our investors on the 9th we indicated that the most likely scenario in our view was that the Fed would continue the stimulus program unchanged and that tapering ...

By New Frontier

Dr. Richard Michaud wrote the following on September 6th.  On September 9th, we sent it to our investment clients: “The August labor report just came in today.  It is a bit weaker than expectations and July and June revisions were downward, some significantly.  While no one can predict what the FOMC will do, I think it is fair to say no one will be predicting a startup of seri ...

Risk parity strategies gained a lot of attention in the post-2008 world of investment products. In a fit of defensive anxiety, investors flocked to products based on methods which purportedly would have lost less during the crisis. A recent Wall Street Journal article claims that “Assets in risk-parity mutual funds totaled $15.1 billion at the end of May, up from $73.6 million ...

By New Frontier

Most traditional optimizers have two inputs – mean and variance. In fact, most portfolio optimization frameworks pit some notion of return against some notion of risk. The conventional wisdom in the finance practitioner community is that high quality, accurate estimates are available for the risk inputs, whereas the expected return estimates are highly proprietary and subject t ...

Investors have nervously anticipated the end of the Federal Reserve policy of stimulating U.S. economic growth with quantitative easing (QE3).  The June 19th report by the Federal Reserve Chairman on the state of the economy reflected an unexpectedly positive view of the recovery.  As a result...

By New Frontier

Clients aware of the recent stretch of low yields for U.S. Treasuries have been asking their managers to explain why their portfolios contain long bonds. Given that ten-year bonds have been yielding about 2% and thirty-year bonds around 3%, near historical lows for the U.S., many clients question their exposure to interest rate risk. In this article we will attempt to elucidate the role played by long bonds in a well-constructed portfolio, and to provide some additional talking points that could be helpful for the advisor addressing questions about long bonds from their clients.