“Lower for longer” rate environment pressures investors

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It’s essential to look at investment income on a risk-adjusted basis. But is more income worth the additional risk?

Duration risk has increased significantly since rates have come down, explains Ed Al-Hussainy. And because of this, investors are more exposed to movements in interest rates, whether it’s in risk assets or safe-haven Treasuries. As safe yields decrease, investors feel more pressure to go into lower-quality credit or riskier asset classes in order to generate income. But it’s the risk-adjusted return that matters.

 

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