Forward Management

Interest rate risk is one of most pressing topics being discussed among advisors, consultants and investors. As of March 2014, we have been through five and a half years of extraordinarily aggressive monetary policy and outright intervention in the capital markets by the U.S. Federal Reserve.

Accelerating outflows from bond funds in 2013 highlight investor nervousness over the prospect of rising interest rates. Investors may want to carefully assess the role of fixed-income investments in their portfolios, particularly in light of other types of income-producing vehicles. Upon careful evaluation of their options, investors can make adjustments suitable to their objectives.

Emerging markets (EM) have been an enduring growth story, but their recent stretch of underperformance and fears of a global economic slowdown are chilling investors enthusiasm. Pulled between opportunity and risk avoidance, many investors have been left uncertain as to what they should do next.

How Real Is the Recovery in Commercial Real Estate? A conversation with Joel Beam and Ian Goltra of Forwards Real Estate Portfolio Management Team.

Multisector bond market strategies may provide an opportunity to capitalize on differences in relative value. A more refined and global approach may generate yield with dividend-paying stocks. Emerging market (EM) corporate bonds feature attractive fundamentals and have increased in popularity as an asset class.

While investors may assume that dividend investing is relatively straightforward, they commonly make mistakes that may undercut the potential income and total return of their investments.

Investors have suffered with low yields, but profited from rising bond values during the 30-year bull market for bonds. We believe the bond market is moving into a bearish phase, putting the value of existing bond holdings at risk. A variety of income-producing options are available for those who want to diversify bond portfolios and seek better yields. Historical analysis shows that a diversified portfolio would have outperformed traditional bonds during the last bear bond market and in periods of rising interest rates.

Say you are evaluating the markets of two countries in a search for investment growth opportunities. One country's sovereign debt is 120% of its gross domestic product (GDP), while the other has outstanding sovereign debt that represents only 11% of its GDP. Saddled with sovereign debt, the first country faces painful fiscal austerity measures, inflationary ones, or bothany of which will no doubt stifle economic growth.

Commercial real estate markets appear to be entering an extended cycle of recovery. The recovery is expected to play out unevenly across U.S. and international markets, with the first wave focused on knowledge-based, gateway cities and technology corridors. Commercial real estate is currently inexpensive by historical standards. Unlike residential markets, commercial real estate markets appear healthy, with rising liquidity and transaction levels. Institutional and private-equity funds are ratcheting up their real estate commitments, seeking 6.5%-8% returns in line with historical averages.

How interest rate movements impact real estate securities is a complex but topical matter. After studying the historical performance of these securities, our findings indicate that: Not all interest rates move together. Real estate securities have had surprisingly low correlations to interest rates. More often than not, real estate securities have generated positive performance during periods of rising interest rates. These observations indicate that credit quality, yield spreads and underlying fundamentals play an equal or more important role in investment returns than interest rates alone.

Many investors continue to expect 10% returns ? but these days, are doing well if they earn 5%. They need to understand why major shifts in the global investment climate are challenging them to reset return expectations and reboot their plans. After six decades of double-digit average U.S. stock market returns, many American investors may have come to expect that they will earn similar returns going forward. And why wouldn?t they? From 1948 to 1978, for example, the U.S. stock market generated an average annualized total return of 10.7%.