“A goal without a plan is just a wish” ¹, If you set a goal but don’t create a plan to achieve that goal how will you attain it, How will you hold yourself accountable, How will you track your progress along the way,  , Likely you won’t, You will continue to dream, Set your goals, Do you want to go to college   Do you want to start a business   Do you want to move across the country   Do you want to retire at age 65   These are not dreams these are attainable goals  Think for a moment about professional athletes   They were once children with big dreams   Those dreams became goals as they continued to excel in their respective sports and realized their potential   Yes they…, Create the roadmap to meeting your goals, Not everyone is a planner   If that is you you are not alone Lack of time lack of money or it’s too complex are just a few of the reasons individuals say they don’t have a financial plan written or not   However 92% of Americans say nothing makes them happier or more confident than when their finances are in order ³ Although planning may not be your favorite pastime it can help you get your…, Consider professional guidance, It is important to not only think about what it is you are trying to accomplish but to take it a step further and develop a written strategy to help you achieve your own unique objectives   Have the conversation ask yourself (and your partner to prioritize those goals and reach out to a trusted financial advisor to help create a written financial plan that can keep you on track   Having a plan…

Will Beam is a Managing Director of Acquisitions in Mesirow Institutional Real Estate Direct He is responsible for overseeing all aspects of the acquisition process including managing sourcing financial analysis due diligence financing and underwriting procedures Will has nearly 20 years and over $45 billion of real estate investment experience Prior to joining Mesirow in 2022 he served as a…

William Maniscalco is a Senior Managing Director in Mesirow Wealth Management He provides comprehensive wealth management and investment management programs for affluent individuals families businesses and not-for-profit organizations Bill joined the firm in 1998 and has 34 years of industry experience He uses his expert knowledge in cash flow forecasting for retirement and college planning life…

Bill Robbins is a Managing Director and Wealth Advisor in Mesirow Wealth Management He specializes in comprehensive financial planning for individuals and families with a primary focus on asset accumulation college planning and/or retirement planning He also provides retirement plan solutions for small business owners Bill joined the firm in 1998 and has over 25 years of experience in the…

Yes high yield bonds’ true duration is… negative, When we first published this white paper in early 2021 we noted that all the analysis happened after inflation was subdued in the 1980s In the 13 cycles where Treasury rates increased high yield credit spreads also compressed and high yield bonds exhibited negative empirical durations and thus positive returns However we also noted that should higher rates be accompanied by higher inflation we…, FIXED INCOME IN RISING RATE ENVIRONMENTS¹ HIGH YIELD VS IG, ​Source Bloomberg & Credit Suisse We are always a bit befuddled when we are asked about the duration of our portfolio and how we “manage” duration We wonder which duration is of concern…the conventional measurement or the way our portfolio , empirically,  responds to changes in Treasury rates All the conventional measurements of duration—Macaulay duration modified duration effective duration option-adjusted duration and the like—are purely mathematical constructs which measure the , theoretical,  price response of a bond when rates rise or fall Though some of these adjust for the embedded call options in most corporate bonds they all ignore the most important feature of high yield bonds—the fact that default risk introduces large (and more important , variable, differences between promised cash flows and the expected cash flows that actually determine values of bonds Recently respected researchers at Bank of America/Merrill Lynch (BAML published a short note in which they systematically calculated the empirical durations of corporates of different ratings over a ten year period using weekly returns and the five year Treasury rate as the reference point…, up, 2   FIGURE 2 , EMPIRICAL DURATIONS BY RATING, Source Oleg Melentyev and Eric Yu Bank of America/Merrill Lynch High Yield Strategy September 4 2020 Note that investment grade bonds of all ratings do have positive empirical durations but high yield bonds actually have negative durations which become increasingly negative as we descend from BB to CCC High yield bonds are not immune to the mathematical fact that a more heavily discounted cash…, promised, cash flows which themselves change when rates are higher During the low-inflation era since the 1980s rising rates have generally occurred at a time when the economy is improving and a stronger economy means that expectations of default rates are falling Cash flow is more highly discounted but there is more expected bond cash flow to begin with when the economy is booming and this latter effect…, a high yield portfolio is actually a natural economic hedge,  to a high grade universe whose duration has been significantly lengthening in recent years Ten years ago the duration of the Barclays Aggregate was about 5 years Today it is 64 years  Will the robust inverse relationship between interest rates and high yield bond prices hold up in the future This turns on why rates might rise As noted earlier all of the analysis in this paper happened after…, gross,  expected default rate is 42% but if the bond defaults it will be converted to cash at a value of 40% of par…thus the , net,  default loss rate is the aforementioned  42% *(1 - 40% = 25%  The expected cash flow (expected coupon plus expected partial principal return in the event of default in year 1 is (8 * 958% + (40 *42% = 934 The expected cash flow in year 2 is (8 * 958% * 958% + (40* 42% * (1 - 42% = 895 And so on for years three four and five The total expected cash flow from this bond over its life is 1236 -…, highly,  variable For B rated bonds if we look at all five-year periods in the S&P default database the lowest quintile 5-year default loss rate is 102% the third quintile loss rate is 26% and the highest quintile 5-year default loss rate is 43% The investor and the market may believe that after rates have shifted up and the economic outlook has improved the forward-looking default loss rate has…, as if,  every manager responded to changes in rates as we have described herein Click and drag to resize ​ DOWNLOAD   FOR EDUCATIONAL INSTITUTIONAL AND INFORMATIONAL PURPOSES ONLY There can be no assurance that any performance or results based on examples of duration strategies discussed herein will be achieved and materially different results may occur Please see the disclosures at the end for…

Yolanda Moore is a senior operations associate in Mesirow Currency Management Her primary responsibilities include oversight and management of counterparty trade confirmations reports and settlement processes Yolanda has more than 30 years of operational experience in foreign exchange Prior to joining Mesirow she was a senior trade support analyst for ABN AMRO and foreign exchange operations…