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Credit risk premium ‘underestimated’ due to duration fault, says AQR [updated]

first_imgAQR said the returns from corporate bonds were driven by changes in the risk-free rate and the spread over the risk-free rate.To isolate the component of returns attributed to credit risk one must remove the effect of interest rates by subtracting the returns of a risk-free instrument from a corporate bond return, while matching duration.AQR said previous research isolating credit risk-premium assumed matching duration, but risk-free bonds were generally longer and carried more term premium thus have a higher risk-adjusted retrun than shorter bonds. (see diagram)Scott Richardson, managing director at AQR, said the average duration was around seven years for a corporate bond but 12 for risk-free sovereign bonds.This meant estimates of the credit-risk premia were underestimated.”If you are subtracting the longer-dated government bond, you are subtracting too much of a return from the corporate bond return. And that simple difference pushes down the estimate of the excess credit return,” he said.“People have effectively over-hedged the corporate bond return; the consequence being that given a positive term premium you are pushing down the estimate of the credit risk premium.” The credit risk-premium generally identified in corporate bonds has been underestimated with research definitively showing its existence and that it acts as diversifier in equity and sovereign bond portfolios.A time-series analysis research paper from AQR Capital Management showed the excess return of corporate bonds over sovereign bonds had been wrongly accounted for, meaning the risk premium associated with credit risk was not correctly identified.The paper ’Credit Risk Premium: Its Existence and Implications for Asset Allocation’ also said credit risk premium does exist and would diversify a 60/40 equity and sovereign bond portfolio over the long term.The research, carried out by Attakrit Asvanunt and Scott Richardson from AQR using data from 1926 to 2014, showed term-risk was wrongly identified as equal in previous studies meaning the actual return allocated to credit risk was underestimated. Source: AQR Capital ManagementGraphic to show over-estimation of credit risk-premiaThe paper also found the average monthly credit-risk return was 21 basis points using data from August 1988 to December 2014.However, the pair also looked at whether exposure to credit risk was beneficial in a portfolio sense, or if the premia was equity risk-premia in disguise.It tested three portfolios, over different time sets, with different weightings to risk-free government bonds, equities and corporate bondsA long-only portfolio between 1988 and 2014 weighted 73%, 15% and 12% respectively gave an optimal risk and return profile, while on a longer 1936 to 2014 scale the weightings was 35%, 17% and 48%.Collectively, the results showed there was a risk-premia to be had from exposure to credit risk which is sufficiently different to equity risk-premia, the paper said.However, Richardson stressed these were tactical allocation considerations, as different periods of time and economic cycles would yield different results.He said the finding the existence of credit risk-premia was obvious, but finding the existence of positive risk-adjusted returns for credit was unique.“You can only uncover the result with careful attention to measurement.”Earlier this year, AQR teamed up with the London Business School to jointly launched the AQR Institute of Asset Management, forming a 10-year collaboration to fund and generate research across a range of disciplines.This article, originally published on 13 April, has been updated to correct a misunderstanding by the author,WebsitesWe are not responsible for the content of external sitesCredit Risk Premium: Its Existence and Implications for Asset Allocationcenter_img #*#*Show Fullscreen*#*#last_img read more

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Pension fund, insurer seeking infrastructure managers via IPE Quest

first_imgA pension fund based in Belgium and a Scandinavian insurance company are each looking for infrastructure managers via IPE Quest’s Discovery service.According to Discovery search DS-2373, the pension fund wants to invest via an unlisted pooled fund, with an allocation that could be for between €10-15m.The mandate would be for infrastructure equity only.The pension fund is targeting returns of between 7.5% and 10%. It has some flexibility as to the geographic spread of investments. It specified that the mandate would be pan-European, but indicated it would accept OECD countries as the asset region if the main focus were on Europe (more than 50%).Interested parties should have a track record of at least five years and register their interest by 13 November.Meanwhile, the Scandinavia-based insurance company is looking to allocate up to €200m to infrastructure in global developed markets, via a pooled fund.It anticipates placing a mandate in March next year.The closing dead for the insurer’s DS-2371 search is 7 November.The IPE Real Assets news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email jayna.vishram@ipe-quest.com.last_img read more

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Bibby Marine Services Takes Delivery of Bibby WaveMaster Horizon

first_imgBibby Marine Services has taken delivery of its second Damen Accommodation Support Vessel (ASV) 9020, Bibby WaveMaster Horizon, at Damen Shipyards Galati in Romania.On her arrival in the North Sea, the Bibby WaveMaster Horizon will begin maintenance work off the coast of Germany on two EnBW and Enbridge-owned windfarms– Hohe See and Albatros – for Siemens Gamesa Renewable Energy and EnBW.Source: Damen“We are very pleased to be handing over Bibby’s second ASV 9020 Walk-to-Work vessel,” said Arjen van Elk, Damen sales manager for the UK and Ireland.“Following the celebrations of her naming ceremony earlier this year she is now fully ready to begin her first long-term contract. With two vessels in operation the ASV 9020 is most certainly a proven concept and Damen Shipyards Galati has once again demonstrated its ability to deliver sophisticated ships on time and to the highest standards.”The build of what was to be the Bibby WaveMaster Horizon began in 2014 alongside that of its sistership, the Bibby WaveMaster 1, in anticipation of future demand. When Bibby Marine Services and Siemens Gamesa confirmed their contract at the end of 2017, Damen then accelerated construction to meet the required delivery date.Source: DamenLocated approximately 98 kilometres from the German coast, the 497MW Hohe See wind farm comprises 71 Siemens Gamesa 7MW wind turbines the last of which was installed at the site mid-August by Fred. Olsen Windcarrier’s jack-up Blue Tern. The wind farm delivered first power mid-July.The final turbine on the 112MW Albatros wind farm was installed in late September. The two projects are being built as one and are due to be put into operation by the end of 2019.last_img read more

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Ronaldo could return to Real Madrid

first_img Ronaldo won eight major pieces of silverware in Madrid including four Champions League titles. Juventus landed the 35-year-old in their quest to end their 14-year wait to become European champions. However Real could look further towards the future having made Paris Saint-Germain’s Kylian Mbappe their top priority. read also:‘La Liga will go on without Messi as it did without Ronaldo’ Zinedine Zidane’s side were hopeful of landing the France World Cup winner this summer but have been forced to shelve plans until next summer over the coronavirus disruption. FacebookTwitterWhatsAppEmail分享 Promoted ContentWorld’s Most Delicious FoodsTop 10 Most Iconic Characters On TVThe Very Last Bitcoin Will Be Mined Around 2140. Read More9 Facts You Should Know Before Getting A Tattoo7 Universities Where Getting An Education Costs A Hefty PennyWhich Country Is The Most Romantic In The World?Who Earns More Than Ronaldo?A Soviet Shot Put Thrower’s Record Hasn’t Been Beaten To This DayBest & Worst Celebrity Endorsed Games Ever Made5 Of The World’s Most Unique Theme Parks10 Hyper-Realistic 3D Street Art By Odeith10 Risky Jobs Some Women Do Loading… center_img Cristiano Ronaldo could make an incredible return to Real Madrid for a cut-price fee. Cristiano Ronaldo’s Juventus won Serie A last year Juventus may be forced to cash in on their main assets in order to balance the books following the global spread of coronavirus. With football coming to a halt, clubs across Europe are dealing with the financial implications as they struggle with a lack of revenue. Ronaldo left the Bernabeu for Turin in 2018 in a £100million deal with wages thought to be around £510,000-a-week. But reports in Italian publication Corriere dello Sport report how the Old Lady may consider letting him leave for £50m to ease the financial burden with Real interested.Advertisementlast_img read more

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Paris pounces to thwart the Irish

first_img “He’s a mile-and-a-half to a two-mile horse. He quickens, and I think that’s made the difference. “I’ve always wanted to win this race. It’s very hard to do it, so it’s a great day.” Connections could now consider supplementing Trip To Paris for the Gold Cup at Royal Ascot. “This is a similar type of horse to Red Cadeaux and he’s improving all the time,” said Dunlop. “We might supplement him for the Gold Cup, but I think we’ll wait and see. “This horse relaxes. He wore blinkers as a colt (now a gelding) because he was lazy, but he can stay this far and he’s got a good turn of foot. “We don’t have to do anything with him at home now as he’s got a wonderful temperament. He’s become a man this year.” On a possible trip to Australia for the Melbourne Cup in the autumn, the Newmarket handler said: “He’s got to rise in the weights to get into the Melbourne Cup this year. “Maybe we’ll take two (Trip To Paris and Red Cadeaux) to halve the expense.” Press Association Lee said: “He was hanging badly left, and I ended up dropping the reins along the straight. “He’s always travelled well and he showed at Ripon he’s got a turn of foot.” The landscape of the race did not alter too much until the final five furlongs when the front-running Buthelezi faded out of the picture. John Reel was always to the fore and gained a slight advantage, but the Irish duo were hot on his heels and ended up jousting for top honours two furlongs out. Just when it looked like the versatile Quick Jack had the edge over Zafayan, Trip To Paris suddenly darted into contention and ended up scoring by three-quarters of a length on his first try at beyond two miles. Gabrial’s King completed the minor positions in fourth place. Dunlop, whose inmate was bringing up a hat-trick following victories at Lingfield and Ripon, said: “The horse was amazing. “It’s the first time he’s run at that trip – he’s been a revelation. I made the strange entry and he’s won. Trained by Ed Dunlop and ridden by Graham Lee, the four-year-old (10-1) arrived with a last-gasp charge from the outside of the field. Tony Martin’s Quick Jack finished second as the 4-1 favourite, while the Dermot Weld-trained Zafayan was third. Trip To Paris denied the Irish raiders when coming with a power-packed late run to claim the Betway Chester Cup.last_img read more

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Honduras humble Guyana 3–0 at CONCACAF U-17 Championship

first_imgGUYANA’S U-17 team suffered another defeat at the CONCACAF Championship yesterday, falling 0-3 to Honduras, played at the IMG Academy (Field 11), Bradenton, Florida. The Sampson Gilbert-coached unit had lost their opening game of the tournament 4-0 when they came up against El Salvador, and were hoping for at least a credible performance against another Central American side, but, things didn’t go in their favour.Guyana trailed at the end of the first half 0–1, when forward Jeffrey Miranda netted for Honduras in the 14th minute.In the second stanza, Guyana were reduced to 10 men, after Shannon Samnauth picked up his second ‘yellow’ of the already lopsided affair in the 61st minute.Honduras capitalised on the wounded Guyanese team, who saw Miguel Carrasco net the game’s second goal in the 64th minute, while Miranda completed his double when he found the back of the net in the 67th minute, to give Honduras their first win of the tournament, since they lost 0-2 to Haiti in their first game.Guyana will play their final Group G game against the undefeated Haiti tomorrow at 10:00hrs. (Rawle Toney)last_img read more

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Victor Moses Included in BBC Team of the Week

first_img* Chelsea defeats Southampton 4-2 to go seven points clear at the topNigeria and Chelsea striker, Victor Moses, and three other Blues players werelisted in the BBC Team of the Week released on Tuesday.The Super Eagles winger whose career was revived with the arrival of Italian Antonio Conte at Stamford Bridge was included in the team of the week following his stellar performance for Chelsea last weekend after his contribution led to the 4-2 defeat of Tottenham Hotspur in the FA Cup semi-finals. Moses featured in the game for 90 minutes, putting in a man of the match performance, including winning the vital penalty that helped Chelsea go into the half time break leading 2-1.His performances under Conte has made him a regular in the team after years of being out on loan from the club during the coaching spells under a number of other coaches.Moses is making the team of the week, assembled by the BBC for the fourth time this season, a sign of how influential and useful he has become for the title favourite.Meanwhile, Diego Costa scored twice as Premier League leaders Chelsea edged closer to the title with victory over Southampton at Stamford Bridge last night.The Spaniard, Eden Hazard and Gary Cahill – all back in the starting XI – got the goals that extended the Blues’ advantage over second-placed Tottenham to seven points.Hazard opened the scoring with a low strike before Oriol Romeu tapped in.Cahill’s header made 2-1 before Costa nodded in and the scored a well-taken second.And in stoppage time, former Chelsea player Ryan Bertrand scored a fine header for the Saints.Blues captain John Terry, who is leaving the club at the end of the season, came on late in the match for Moses to make his first league appearance since November.Spurs can reduce the gap to four points once more with victory at Crystal Palace today.Antonio Conte’s Chelsea team is playing at Everton on Sunday.BBC’s Team of The Week:(Goalkeeper)Eldin Jakupovic (Hull City)(Defenders)David Luiz (Chelsea)*Victor Moses (Chelsea)*Gabriel Paulista (Arsenal)Nacho Monreal (Arsenal)(Midfielders)Christian Eriksen (Tottenham Hotspur)Willian (Chelsea)N’Golo Kante (Chelsea)Dele Alli (Tottenham Hotspur)Kamil Grosicki (Hull City)(Attacker)Christian Benteke (Crystal Palace)Share this:FacebookRedditTwitterPrintPinterestEmailWhatsAppSkypeLinkedInTumblrPocketTelegramlast_img read more

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Healy to miss Clermont clash

first_imgPhoto © Pat Flynn Leinster will have to make do without Cian Healy for Sunday’s European Champions Cup semi-final against Clermont.The 29 year old has been handed a two-week ban after he was found guilty of “committing an act of foul play” in last weekend’s win over Connacht.Healy was cited after the incident was missed by the match officials.last_img

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Juventus’ Moise Kean stands defiant in face of racist abuse at Cagliari

first_imgJuventus manager Massimiliano Allegri felt that the teenager should not have responded to the racist chants – but called for the “idiots” responsible to be handed lifetime bans.“He shouldn’t have celebrated in that manner,” he said. “You need great intelligence to deal with these situations and should not go to provoke people. That, of course, does not mean the idiots in the crowd and the way they reacted should be justified.“We need to use the cameras, find those who are doing it and punish them. It’s very simple, identify them, and not one-year ban or two, just give them a lifetime ban.“We’ve got the technology, it can be done if the authorities want to. The problem is, they don’t really want to.”Juve team-mate Leonardo Bonucci also said after the match his team-mate should not have provoked the home fans.The defender said: “There were racist jeers after the goal, Blaise heard it and was angered. I think the blame is 50-50, because Moise shouldn’t have celebrated like that, and the Curva should not have reacted that way.“We are professionals, we have to set the example and not provoke anyone.”Juventus players, led by captain Giorgio Chiellini, had protested to referee Piero Giacomelli, who was also in conversations with both managers.Cagliari skipper Luca Ceppitelli went over to the fans behind the goal, appealing for the chants to stop, while France midfielder Blaise Matuidi appeared to gesture to Allegri to take his players off.When play did continue, an announcement went out over the public address system to highlight the issue, which was greeted by more jeers from some home supporters before the final whistle came after five minutes of added time. Massimiliano Allegri says Kean should not have responded Juventus forward Moise Kean was subjected to racist abuse from the stands as the Serie A leaders won 2-0 at Cagliari, but the 19-year-old took a stance of defiance after scoring a late second goal.The Italy international was abused all night by sections of the home support, with monkey chants aimed at him, but had the final say by netting Juve’s second goal with five minutes left.The teenager stood at the post, his arms aloft in response to the chants. Joao Cancelo comforts Kean after the final whistle The incident came eight days after England players were subjected to racist abuse during their Euro 2020 qualifier in Montenegro, and on the day UEFA president Aleksander Ceferin insisted referees would be told to be “brave” and halt matches to stamp out such abuse from “loud, aggressive and primitive” people.Kean, whose goal added to Bonucci’s towering header in the 22nd minute, was handed a start by Allegri at the Sardegna Arena with Mario Mandzukic laid low by illness.He had impressed when finding the net against both Finland and Liechtenstein for Italy, before then following it up with the winner over Empoli after coming off the bench.In the other Serie A match on Tuesday, AC Milan drew 1-1 with Udinese.–Source: Sky Sportslast_img read more

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Dodgers’ offensive problems don’t start at the top, Dave Roberts says

first_img“It’s just more magnified. These guys have taken 40, 50 at-bats. I absolutely understand that it’s a shorter season. But they’re going to get going.”A career .303 hitter with a .911 OPS in the leadoff spot, Betts has gone 7 for 21 with a .417 on-base percentage in his five starts there this season while batting .250 (10 for 40) with a .286 on-base percentage batting second.But Roberts doesn’t believe in trickle-down economics. Moving Betts into the leadoff spot wouldn’t be a panacea for the Dodgers’ other offensive woes, he said.“Certainly you talk about the leadoff hitter, the role, the spark — I absolutely understand that,” Roberts said. “But you look up and down our lineup, there’s really not anyone swinging the bat considerably well. So just to have Mookie in the leadoff role I don’t think makes everybody in the order get hot.“When you’re talking about one player and lineup construction where he hits leadoff once a game, the numbers to last year are very similar as far as (Betts’) production. Now you’re taking in eight other players in a lineup that particular game that matter as well. So when you potentially give them matchups and make it a little more difficult for the opposing managers, I think that has some value too.”SEAGER PROGRESSFor the second consecutive day, injured shortstop Corey Seager tested his back by doing agility drills, running, swinging a bat and playing catch.“He came out of it feeling good,” Roberts said. “It’s just going to be a slow progression. I don’t know when he’s going to get on the field and take batting practice, take grounders at full speed. Then we’ll know more.”Roberts said the Dodgers still do not feel it’s necessary to put Seager on the injured list despite playing shorthanded for a fourth consecutive game Tuesday.“Right now we’re OK with the versatility we have to just stand pat,” Roberts said.GONSOLIN STARTThe Dodgers have yet to start a pitcher on less than five days’ rest this season. And they’re not about to start now.In the midst of a stretch of 17 consecutive days with games, Roberts said the Dodgers will promote right-hander Tony Gonsolin to start Wednesday’s game against the San Diego Padres, pushing left-hander Julio Urias (and the rest of the rotation) back a day.“I think right now, trying to appreciate that we’ve got 17 in a row and we want to make sure that we really take care of the starters and pitchers in general,” Roberts said. “So I think right now to give them the extra day over a few turns, I think makes sense for everybody. And, we can kind of push them a little bit more as we get into September.”This has become standard procedure for the Dodgers. Over the previous three seasons, their starting pitcher has been operating on five days’ rest or more in 70 percent (339 of 487) of their regular-season games.“It’s not just a Julio thing,” Roberts said of Urias who is 1-0 with a 2.40 ERA after his first three starts. “I think it’s a good thing for all of our starters.”ALSOReliever Joe Kelly did have the hearing for his appeal of an eight-game suspension on Monday. The Dodgers are awaiting word on the decision.Related Articles “That’s kind of been my whole career,” he said accurately — 567 of his 794 career starts in the big leagues have been at the top of the order. “I don’t foresee hitting somewhere else. If there’s a need then I’m always ready if it needs to happen.“I’d like to hit in one spot. I don’t like moving around. … I think it’s just a comfort level for me. I can only speak for myself, to know that every day I’m going to be in the lineup, batting first.”But Betts has started as the leadoff hitter just five times in the first 18 games since signing a 12-year contract extension with the Dodgers. Instead, Joc Pederson (seven) and Max Muncy (five) have appeared there more often with Betts batting second as Roberts seeks a “left-right” lineup that makes it more difficult for opposing managers to make pitching decisions (particularly with the new three-batter rule for pitchers).The results have not been good. Despite overall good production that puts them near the top of the National League in most offensive categories, the Dodgers’ lineup has had some soft spots and the leadoff spot is one. Going into Tuesday’s game, the Dodgers’ leadoff hitters had combined for a .188 average and .685 OPS.“Obviously having Muncy in there at times, he’s a traditional on-base guy and he’s just not swinging the bat well,” Roberts said Tuesday. “Right now, he’s just in a little bit of a funk. He’s going to get out of it. I don’t think the leadoff spot is the reason. Joc has hit leadoff many times over for us in years past. And he’s just not swinging the bat well. Dodgers hit seven home runs, sweep Colorado Rockies Dodgers’ Max Muncy trying to work his way out of slow start Newsroom GuidelinesNews TipsContact UsReport an Error How Dodgers pitcher Ross Stripling topped the baseball podcast empire LOS ANGELES — When the Dodgers traded for Mookie Betts, they acquired one of the best leadoff hitters in baseball.But they haven’t used him that way.In spring training, Dodgers manager Dave Roberts said he would — “That’s where he feels comfortable and that’s where we’re at right now,” he said in February.Betts himself made it clear that was his preference. Fire danger is on Dave Roberts’ mind as Dodgers head to San Francisco Cody Bellinger homer gives Dodgers their first walkoff win of season last_img read more