What to Expect From Your Direct Lenders When the Cycle Turns

Direct lending, or senior debt, funds have come to dominate the private credit asset class, capturing significant portfolio allocations and outpacing fundraising of other private credit strategies. However, over the past 18 months, Cambridge Associates has felt enthusiasm for senior debt allocations cool as discussions turn to senior debt funds’ performance through the credit cycle.

July 2019

The US Yield Curve Inverted! Should Investors Underweight Risk?

Although an inverted yield curve is not a sign we welcome, it also is not a clear indicator of an imminent equity market downturn. Instead of underweighting risky assets, we suggest investors take this opportunity to refresh plans to manage through the next bear market.

April 2019

Revving Pension Plans’ Funding Engines

Many corporate defined benefit plans experienced significant funded status gains in recent years. Recent capital markets volatility, however, has set many plans a few steps back, re-focusing plan sponsors on both protecting long-term funded status gains and closing the asset-liability deficit. Given increased volatility in global equity markets, relatively high valuations in many market segments, and the late stages of the economic and credit cycles, optimizing the plan’s growth engine is more critical, and challenging, than ever.

April 2019

Amid Rising Risks, Should Investors Maintain Credit Allocations?

Yes, but investors should be selective in allocating to credit markets at this point in the cycle, and understand that the overvaluation of many credit assets could make attractive returns hard to come by.

August 2018

Should Fixed Income Derivatives Play a Role in Liability Hedging for Pension Plans?

Yes. Since fixed income derivatives are more capital efficient and flexible than physical bonds, they can play a key role in liability hedging for many corporate and other single-employer pension plans.

May 2018

Trade Finance: An Expanding Opportunity for Institutional Investors

While trade finance is among the oldest forms of institutionalized credit, it has only recently become an accessible market for most institutional investors. Providing high liquidity, good return premiums over cash, and a predictable risk profile, it can play a valuable role in portfolio strategy. However, as a fairly new option for most investors, its […]

May 2018

Is Cash Still Trash?

Not in the United States. As short rates have increased and the yield curve has flattened, US T-bills offer more appeal than they have in some time (and short-dated Treasuries even more so).

May 2018

Distressed Debt: A New Way to Categorize Managers

As the economic cycle progresses, the next recession draws inexorably closer, bringing with it the next downturn in the credit cycle. Recognizing this, institutional investors are increasingly considering allocations to distressed debt managers. While lumping all distressed managers into one group is tempting, different managers have meaningfully different approaches that are not captured by considerations […]

February 2018