I believe investors are reaching for yield and there are multiple signals indicating such. This is a direct outgrowth of easy money policies by central banks as nominal yields are at record lows and real yields are negative.
Investors, particularly pension funds, are having a hard time adjusting to the new monetary regime of financial repression and low nominal returns. Pension funds will have to reach for yield, take on risk, or run the losses from the new investing climate through the balance sheet and income statement, lowering income for the companies they are attached to.
Insurance companies can charge higher rates on policies. But pension funds have to meet the new lower nominal return environment by either moving out the risk spectrum to maintain return or by recognizing their p...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.