Opportunities in CLOs Amid a Low-Rate Environment
In the current
low-rate fixed income environment, investors are searching for opportunities
outside of the broad indexes. Weitz Investment Management fixed income
portfolio managers Tom Carney, CFA, and Nolan Anderson explain why corporate
collateralized loan obligations (CLOs) are proving to be attractive options for
their bond portfolios. The two share their view on the interest rate landscape,
inflation, and bond market expectations going forward.
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Management and are not meant as investment advice or to predict or project the
future performance of any investment product. The opinions are current through
the date of publication, are subject to change at any time based on market and
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is being provided as a general source of information and is not intended as a
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investor's specific objectives, financial needs, risk tolerance and time
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representative of a Fund's current or future investments.
Yield to Worst refers to the lowest potential yield (most
conservative yield) that can be received on a bond without the issuer actually
defaulting. YTW is calculated by using worst-case scenario provisions,
including prepayments, calls and sinking funds. Furthermore, YTW is a
forward-looking estimate that ignores capital gains.
Interest rate risk and duration: The shorter a fund's
duration, the less sensitive it will be to shifts in interest rates. As of
03/31/21: Weitz Core Plus Income Fund had an average effective duration of 4.5
years compared to its benchmark of 6.3 years, and Weitz Short Duration Income
Fund had an average effective duration of 1.3 year compared to its benchmark at
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investments involve risks, including possible loss of principal. Market risk
includes political, regulatory, economic, social and health risks (including
the risks presented by the spread of infectious diseases). Changing interest
rates may have sudden and unpredictable effects in the markets and on the
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securities, which involve an increased possibility that the issuers of these
may not be able to make payments of interest and principal. See the Fund's
prospectus for a further discussion of risks.