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Economic and Market Commentary

Despite large differences in the risk and return profiles of publicly traded REITs and private real estate funds, the risk-adjusted returns of these two real estate investment types tend to follow each other more closely, most notably during recessions.

Although both publicly traded REITs and private real estate funds follow the same investment thesis (invest in real estate by pooling investor capital), both fund types have historically provided different risk and return profiles to investors. To examine these differences, we will use the FTSE Nareit All REITs index (FNAR) as a proxy for publicly...
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In order to navigate this lower yield and longer duration landscape, especially in a rising interest rate environment when principal preservation is paramount, having as many tools in the toolbox as possible is beneficial. One of the tools to potentially improve the risk/reward profile of a portfolio is having the ability to utilize an expanded opportunity set of securities that reside outside of traditional fixed income benchmarks.

The current risk/reward profile in the bond market is skewed more toward risk than reward.  Since yields are historically low at a time when durations are historically high, benchmark tethered fixed income investors and passive fixed income indexers are being compensated less for taking on more interest rate risk.  This diverging trend of yield versus...
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Return dispersion is at an all time high in the real estate industry. The main factor driving this trend, alongside a variety of themes, is E-commerce.

Before the pandemic, the NCREIF Property Index, a real estate index that tracks the unlevered gross returns of over $742B in real estate properties throughout the United States, posted average annual returns of 8.28%(1) from 2015 to 2019.  At the height of the pandemic (March 2020), returns fell to less than 2% for the first...
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It is time to embrace the potential for higher interest rates and put the “Income” back into Fixed Income.

Traditionally, investors have been able to count on bonds as a primary source of income.  However, with interest rates beginning 2021 near historic lows and spreads near the tighter end of their range, the set-up for fixed income coming into this year was not particularly attractive.  From a macro perspective, we were forecasting an improving...
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Boyd Watterson Asset Management’s approach to navigating the broad and slightly complicated path to a successful and effective ESG strategy.

ESG – Information Overload to Strategic Clarity In his May 12, 2021 article in Forbes Magazine, Halsey Schreier says “while widely recognized, Environmental, Social and Governance (ESG) is an umbrella term that often means different things to different people.” A simple google search will reveal massive amounts of ESG information with different implications for various...
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The buyer composition of U.S. distressed assets shifted largely to private investors in the COVID-19 era compared to the Global Financial Crisis (“GFC”, 2010 to 2012) when institutional funds were the more active buyers.

Not all economic downturns are created equal as highlighted in the difference between real estate distressed investing from the Global Financial Crisis (“GFC”, 2010 to 2012) when compared to the COVID-19 pandemic era crisis. This blog post will explore the differences in real estate distressed investing during these two time periods. Distressed investing in the...
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Interest rates are likely to be more volatile moving forward given the inevitable cross currents between economic data, investor expectations and the FOMC’s messaging.

The COVID-19 pandemic negatively impacted people’s lives in many ways, fortunately, the rapid and aggressive use of fiscal and monetary stimulus provided significant support to the economy and financial markets around the world. This assistance, coupled with multiple approved vaccines, has now brought us closer to the other side of the pandemic with central bankers...
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There is still uncertainty regarding the impact of whether federal agencies continue to work from home or return to the office on the commercial real estate recovery.

While much of the United States is beginning to open back up with the recent rollout of vaccines nationwide, there is still considerable uncertainty about the lasting effects on the commercial real estate market because of the COVID-19 pandemic. Real Capital Analytics (“RCA”) reports that commercial property sales were up 66% from a year earlier...
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Our fixed income strategies are centered around four alpha drivers that are informed by our macroeconomic outlook.

At Boyd Watterson, our fixed income philosophy is centered on our belief that over time, active management can likely generate attractive risk-adjusted returns.  We believe this is best achieved by taking a strategic view of macroeconomic and market factors coupled with a value-driven decision-making process and rigorous application of risk-management controls. Our process focuses on...
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