FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
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INVESTMENT OPTION 4-A<br />
r<br />
• Option 4 – A: Short-Term Lower-Quality (Continued)<br />
• Benefits<br />
o<br />
o<br />
o<br />
o<br />
Increases the yield on the Fixed Income portfolio<br />
Short-term and floating rate nature provides protection in a rising rate environment<br />
Likely increases returns in low interest rate environment<br />
Short-term and senior nature <strong>of</strong> investments limits default risk<br />
• Drawbacks<br />
o Increases the credit risk <strong>of</strong> the overall Fixed Income portfolio<br />
o Exhibits increased “equity like” risk exposure in periods <strong>of</strong> market turmoil<br />
o High Yield and Bank Loans are expensive relative to history<br />
♦ Many investors have already moved into the space seeking yield<br />
Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 50
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