September 8, 2014 Gilbert Andrew Garcia, CFA Managing Partner.

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Presentation transcript:

September 8, 2014 Gilbert Andrew Garcia, CFA Managing Partner

I. Market Quiz II. Evolution of the Fixed Income Market III. Fixed Income Excess Returns IV. Valuation V. Market Developments 1

GoldHigh YieldAggregate Russell Midcap S&P %10.43%8.90%7.78%4.93% 10 -Year Annualized Returns Ending

GoldHigh YieldAggregateRussell MidcapS&P %8.90%4.93%10.43%7.78% 10 -Year Annualized Returns Ending INDEX

 Return doesn’t account for the risk.  Investors must be compensated for risk.  We should measure returns on a risk adjusted basis. 4

5  Developed by Nobel laureate William F. Sharpe.  Calculated by subtracting the Risk Free Return from the Investment Return and dividing the difference by the Volatility of the Investment. Sharpe Ratio = R - Rƒ σ  A higher Sharpe ratio equates to better risk- adjusted performance.

GoldHigh YieldAggregateRussell MidcapS&P %8.90%4.93%10.43%7.78% 10 -Year Annualized Returns Ending INDEX 10 -Year Sharpe Ratio Ending

GoldHigh YieldAggregate Russell Midcap S&P %7.13%6.94%6.31%6.02% 10 -Year Annualized Returns Ending

GoldRussell MidcapAggregateS&PHigh Yield %7.13%6.94%6.31%6.02% 10 -Year Annualized Returns Ending INDEX

GoldRussell MidcapAggregateS&PHigh Yield Year Annualized Returns Ending INDEX 10 -Year Sharpe Ratio Ending %7.13%6.94%6.31%6.02%

10 INDEX 10 -Year Sharpe Ratio Ending Year Sharpe Ratio Ending GoldHigh YieldAggregateRussell MidcapS&P

$456 Billion

$2.1 Trillion $456 Billion

CMO’s invented  MBS along the yield curve  Floating rate traunches  PAC’s $2.1 Trillion 13

$2.1 Trillion$4.7 Trillion

15 NOW $17.1 Trillion

$456 Billion NOW $17.1 Trillion

AgencyABSCorporatesMBS %30.38%22.13%16.81% 20 -Year Excess Return Ending

AgencyCorporatesABSMBS %30.38%22.13%16.81% 20 -Year Excess Return Ending INDEX

19 $178 Billion

TODAY $178 Billion$4.0 Trillion

21 Source: Barclays Live Last Update: 7/31/2014 Greece U.S. Credit Downgrade Gulf War

(OAS Spread/ 5 yr Treasury yield) 22 Source: Barclays Live Last Update: 7/31/2014 Greece U.S. Credit Downgrade Gulf War

 Electronic Trading  TRACE Data 23

24