Several New Reports from Baird Wealth Management Outline Investment Alternatives in a Low Interest Rate Environment
Today's low interest rate environment continues to create challenges for yield-seeking investors, with the Federal Reserve pledging again yesterday to keep interest rates near zero for "an extended period." As available yields across different asset classes remain compressed, investors are increasingly looking to less traditional investments and may be unknowingly taking on more risk. New reports published by Baird's Private Wealth Management Research team outline some of the choices investors may want to consider in their quest for yield – Real Estate Investment Trusts (REITs), Master Limited Partnerships (MLPs) and unconstrained bond funds – and the risk/return considerations that should accompany those investment decisions. Click here to read the full news release and access the reports.
In this environment where the 10-year Treasury note recently fell below 3%, Baird Senior Fixed Income Research Analyst Craig Elder writes in a recent report that he likes callable agency bonds with "step up" coupon rates – a pre-set coupon rate "step up" that provides for increases in interest rates or the coupon rate as the bonds approach maturity, which minimizes the interest rate risk for investors over time. He also favors agency bonds issued by government-sponsored enterprises (GSEs) that provide credit for the housing sector.
For those in tax brackets above 35%, Elder favors municipal bonds. "Munis are attractive to many investors because the interest income is exempt from federal income tax, and in many cases, state and local taxes as well," he said. "For investors in the top tax bracket, the after tax yields are still higher than any of the other major investment-grade fixed income sector classes."
According to Laura Thurow, CFA, Co-Director of Baird Private Wealth Management Research, "There are a number of alternatives out there that investors may not be aware of because they haven't had to be. Many of the alternatives bring greater risk and volatility. We advise investors exploring these alternatives to be aware of what they are buying and to maintain adequate diversification."
About Baird
Baird is an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe and Asia. Established in 1919, Baird has more than 2,600 associates serving the needs of individual, corporate, institutional and municipal clients. Baird oversees and manages client assets of nearly $84 billion. Committed to being a great place to work, Baird ranked number 14 on FORTUNE's "100 Best Companies to Work For" in 2011 – its eighth consecutive year on the list. Baird's principal operating subsidiaries are Robert W. Baird & Co. in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird's private equity operations. For more information, please visit Baird's Web site at www.rwbaird.com.
Contacts:
Baird Public Relations
Amy Nutter, (414) 765-7250
publicrelations@rwbaird.com
