Month: October 2023

Last year, we advised members on how to take advantage of rising short-term rates and harvest yield on cash holdings. Now, as this period of rapid and frequent rate hikes may be ending, we offer our guidance on how to navigate a phase of stable and possibly declining interest rates. Specifically, we share views on:

• Adding duration to lock in yield
• Mitigating the duration risk that comes with longer-term rates

We also review the four categories we use to group cash, determined by timing of expected need.

• Reserve funds provide the greatest opportunity to extend duration and lock in yield

We recommend a strategy to take advantage of the current rate environment using Reserve funds – even as we caution that members must have some degree of confidence that those funds will not need to be accessed prior to maturity of the recommended investments.

Rising uncertainty in markets have given investors pause on how they should balance their portfolios. 2022 brought with it one of the most aggressive rate hike environments in recent history and a war on the continent of Europe, causing both equities and fixed income to decline in tandem. Investors can be forgiven for being cautious in these environments.  

In this paper, we hope to outline some of the headwinds hedge funds have been facing and how these are now turning into tailwinds. We believe that these new dynamics make hedge funds an even more attractive investment to add dynamism to investor portfolios.

Download our new white paper: Wind of Change: A Favorable Environment for Hedge Funds 

We saw a glimpse of what equity markets could do this summer when, for a couple of months, investors started to believe in a soft landing and the markets began to price in this economic optimism. Year over year, CPI inflation dropped to 3.0% – from 9.1% a year earlier. The Fed has begun to believe that a recession can be avoided, and stocks rallied 9.4% in June and July. In the end, a weaker August and September interval pushed markets a touch lower for the quarter, though our managers generally outperformed.

This is an excerpt from a longer commentary. Please Download the PDF to read the entire 3rd Quarter 2023 CIO Commentary.