Sovereign Money Dancing in Between Fixed Income Strategies
Major benchmark yields are bottoming out. A number of short-term yields in Occidental economies are negative. Loose monetary policy is pushing the risk free rate to zero. Low interest rates are forcing public investors to either diminish annual return expectations or glide along the risk spectrum. For example, in September 2012, the US$ 36 billion Illinois Teachers’ Retirement System decreased their annual target rate of return from 8.5% to 8%. Public pensions across the United States have accepted reductions in their annual target returns. Sovereign wealth funds are dancing in a risk-on and risk-off stage.
Credit strategy funds are gaining traction among pension investors.
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