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Boosting Bond Returns: Return Stacking for Enhancing Liquidity Buckets
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Articles from Education category
Stacking in a Higher Interest Rate Environment
This article explores the relevance of leverage in investment strategies amid higher interest rates. The decision to use leverage should be based on the expected returns of assets rather than current interest rates.
The Risks of Leverage
We confront the two primary risks of performance risk and path-dependency risk, unveiling the delicate balance between leverage and uncorrelated assets. By drawing parallels with the familiar world of mortgages, we demystify complex …
Tracking Error: Return Stacking versus Replacement
For benchmark-sensitive investors (and, let’s be honest, who isn’t at least a little benchmark sensitive), tracking error is an incredibly important metric. If you’re unfamiliar with the term, tracking error captures the volatility in the difference of returns between your portfolio and its benchmark.
Return Stacking and the Cost of Leverage
The core idea behind return stacking is layering one investment return on top of another, achieving more than $1 of exposure for every $1 invested. Of course, if we want to invest more money than we have, it will require us to borrow, which means leverage. One of the key questions with any form of leverage is: how much does it cost?
Return Stacking in an Inverted Yield Curve Environment
If the cost of borrowing is driven by the yield of short-term Treasury Bills, does it make sense to stack bonds in an inverted yield curve environment? In this article, we share four key points as to why we believe the answer is a resounding “yes”.
Return Stacking and Taxes
This article explores a hypothetical example of a return stacked strategy and how the composition of the strategy can impact the after-tax returns of the portfolio.
The Return Stacking Visualizer
To further develop the intuition behind return stacking and capital efficiency, we have developed interactive tools that allow investment professionals to get their hands dirty with the concept of return stacking.
The Glide Path Re-Imagined (Part 2)
Discover how glidepaths adapted to individuals combined with diversification and return stacking benefit result in retirement improvement.
Capital Market Assumptions when Return Stacking
Many financial plans are built off the backbone of capital market assumptions (“CMAs”). These forecasts of asset class expected returns, volatilities, and correlations are critical inputs to the portfolio construction process.