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Credit

By Thomas Koehler, CFA posted 03-23-2012 10:58

  
Credit has been a solid source of return over the last few quarters at the least. The question a firm needs to ask is this, " Our we getting compensated for the credit and duration risk? For instance LQD that represents investment grade debt holds a yield of about 3.9% and a duration of over 5. That is a risk that we are not  willing to take as the best case scenario is perfermance drag. Worst is credit spreads widen and duration unwinds.
Find an alpha manager to fill the credit space and get out of this trade.
tom k
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