What Did We Learn?
By Noah Hamman
What did we learn from the financial crisis? For me, I think it comes down to transparency and confidence. It seems, even the smartest investors didn’t understand the dangers located in what was perceived to be highly rated debt securities. Add in some leverage and a significant lack of confidence, and then boom, we all know what happened. So, are we doing anything differently? Well, if the growth of ETFs can be used as a litmus test, investors seem to be embracing transparency, and I think more importantly are taking a smarter approach to assessing and managing risk. I was just reviewing this table created by the portfolio management team at Newfleet. They see a different approach to managing debt and credit quality by suggesting that being too big to fail can be applicable in many types of business models. Very different from equity, each issue, each tranche needs to be analyzed and understood. Having a team that has depth, experiences and an effective communication process, can put investors in the best place, and hopefully help learn from our mistakes.
Source: Newfleet Asset Management