Investors Beware: Bond Funds May Lose Value as Interest Rates Rise
But New Product Offers 'Guaranteed Solution
As interest rates rise, bond funds could be decimated. Investors are going to be in for a rude awakening within the next 6-12 months," says Adams who adds that RIAS has been warning investors of this for months now. Billions and billions of dollars are currently in bond funds and their values could go down." But, there's hope with a New Product...
Federal Way, WA (PRWEB) May 6, 2004 --- Youd have to live under a rock not to know that interest rates have been at a historical low for some time now. But as inflation rears its ugly head and the job market improves, the market value of bonds will go down as will the NET ASSET VALUES of bond funds, predicts Bob Adams, Managing Director and fixed income expert at Rothstein Investment Advisory Services (RIAS).
As interest rates rise, bond funds could be decimated. Investors are going to be in for a rude awakening within the next 6-12 months," says Adams who adds that RIAS has been warning investors of this for months now. Billions and billions of dollars are currently in bond funds and their values could go down."
Astute bond managers, says Adams, see whats coming so they are converting increasingly to cash. Of course, this causes yields to go even lower. In addition, as interest rates rise and bonds start losing their value, investors will want to sell their bonds, further depressing bond and bond fund prices, he adds.
But the news isnt all doom and gloom. Under a new partnership with New York-based Himelsein Mandel Fund Management (HM), RIAS has become the first Washington, DC-based investment firm to offer HMs market neutral strategy called the HM Onyx Fund.
The HM Onyx Fund is a low volatility investment fund and an alternative to stocks and bonds. This is an all-weather product. It pools about 300 different low volatility managers, and has the potential to provide consistent returns far in excess of current bond yields without the same directional risks that exist in the stock market," said Jason Mandel, Managing Partner with Himelsein Mandel Fund Management.
In plain terms, heres an overview of investor benefits with this unique product:
·Societe Generale Cowen offers a guaranteed version of the product so investors will never lose their initial investment. In short, it offers an absolute return stream regardless of the performance of the stock market. Most bonds funds and stock funds cannot offer that kind of guarantee.
·Its volatility is about 2%, which is 1/8 the volatility of stocks, measured at 16% volatility of the S&P 500 Index of Stocks. Some bond funds, considered to be a safer investment by most investors, have a volatility of 4% or more, which is twice as high as the HM Onyx Fund.
·While the HM Onyx Fund offers a lower risk profile, that does not necessarily equate to low returns.
·Investors can participate with no management fees. HM is compensated with a small percentage of the profits they create. If there are no profits, clients pay HM no fees.
·The fund offers monthly liquidity, an advantage over many traditional fixed-income investments.
Part of the reason market neutral fund of funds arent more popular is because so many misconceptions exists about them. Traditionally when people hear alternative investment funds, they think risk. However, the true purpose of a hedged strategy fund is to reduce risk," says Mandel.
In addition, large brokerage firms dont focus on this type of product because they dont want to lose income from their bread-and-butter activities like stock and mutual fund trading. Arbitrage fund of funds tend to be very consistent in performance. Traditional brokers make money based on transactions. If performance is consistent and strong, no transactions are required and they would lose the fee income generated, explains Mandel. In addition, many of these firms use arbitrage strategies, like those employed by the HM Onyx Fund, to make money for their own firms trading accounts.
With stocks and mutual funds, most brokers get paid by the transaction so the more they move investors money, the more they get paid. Onyxs fees, on the other hand, are based on performance. Rothstein Investment Advisory Services, which is currently the only company offering this product in the Washington, DC area, is a fee-based money management firm. As a fee-based firm, they do not make money from commissions or transactions. Their earnings depend on the increase of the clients portfolio value.
HM and RIAS focus on individual investors and small-to-mid-size institutions, says Mandel. This is the perfect product for an individual who is retiring and wants their investment guaranteed, or someone that wants to buy a house in a few years or an investor who needs to have money available for their childs education," he adds. It may also be appropriate for pension funds or endowments that are seeking consistent performance regardless of the fluctuations in the equity and bond markets.
Contact us for more information about this opportunity at www.craig-dahl-equity-research.com/option-investment.html or call 206-271-3213.
Advisor, Investment & Information Disclaimer
The funds are unregistered private investment funds or pools that employ different investment, hedging, leverage and arbitrage methodologies with exposure to many different securities and futures markets. The funds are not subject to the same regulatory requirements as mutual funds, including mutual funds requirements to provide certain periodic and standardized pricing and valuation information to investors. You should note the following:
| | - The funds represent speculative investments and involve a high degree of risk. An investor could lose all or a substantial portion of his or her investment.
- Any investment in the funds should be discretionary capital set aside strictly for speculative purposes.
- An investment in a fund is not suitable for all investors.
- The funds can be leveraged and a fund's performance can be volatile.
- Some funds may use a single advisor or employ a single strategy, which could mean a lack of diversification and higher risks.
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- An investment in the funds may be illiquid and there are significant restrictions on transferring interests in a fund. There is no secondary market for an investor's investment in a fund and none is expected to develop.
- A fund's fees and expenses - which may be substantial regardless of any positive return - will offset the fund's trading profits.
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- This summary is not a complete list of the risks and other important disclosures involved in investing in the funds and is subject to the more complete disclosures contained in the fund's respective offering documents, which should be reviewed carefully.
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All performance information is net of applicable fees unless otherwise specifically noted.
This material is provided for information purposes only as of the date hereof and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities. No offer or solicitation may be made prior to the delivery of appropriate offering documents to qualified investors. The information contained herein including investment returns, valuations, fund targets and strategies, have been supplied by the funds or their agents and although believed to be reliable, has not been independently verified and cannot be guaranteed. We make no representations or warranties as to the accuracy or completeness of such information. This material is not complete and is subject to the more complete disclosures and terms and conditions contained in a particular fund's offering documents, which may be obtained directly from the fund. Although we may provide our analysis, we do not provide due diligence on an investor's behalf and we are not responsible for an investor's decision. Past performance is no guarantee of future results.
Contact us for more information about this opportunity at www.craig-dahl-equity-research.com/option-investment.html or call 206-271-3213.
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