It is becoming widely accepted that ESG data can provide material insight during the investment analysis process. Often, the investment that comes to mind happens to be a stock, or the equity markets in general. That is entirely appropriate and applicable, but ESG integration applies beyond the stock market.
Investment-grade fixed income investments are typically considered safer than equities, and may offer lower returns due to the traditional risk/reward tradeoff. The safety offered by a bond portfolio can quickly erode if undue risk is taken in selecting credit exposures.
Corporate bond holdings offer an asymmetric return profile (best case scenario is receiving earned interest and return of principal; worst case is 100% loss of principal). While complete loss of principal is an extremely unlikely scenario, it would have an outsized impact on a portfolio if realized.
With constrained upside in the best-case scenario, and significant downside in the worst-case scenario (however unlikely), risk management becomes paramount.
To limit exposure to the risk of defaults, bond investors often focus on the 4 Cs – capacity, collateral, covenants, and character. This provides a framework for assessing the likelihood of repayment.
Timothy Calkins, CFA
Co-Chief Investment Officer
Timothy serves as a member of the Nottingham Investment Policy Committee. He brings over 22 years of investment experience to the team. Timothy is responsible for corporate and municipal credit research & trading, as well as contributing to our economic outlook and interest rate expectations. He also leads our alternative investment research and custom allocations, with a focus on private credit and liquid alternatives. Timothy’s membership and active participation with the Buffalo Angels group keep him connected to the local start-up community.
Nottingham Advisors offers both institutional and individual clients experience, sophistication, and professionalism when helping them achieve their goals. With over 40 years of serving Western New York and clients in more than 30 states, Nottingham tailors each solution to fit the specific needs of each client.
For more information about Nottingham’s offerings, visit www.nottinghamadvisors.com or call 716-633-3800.
Nottingham Advisors, LLC (“Nottingham”) is an SEC registered investment adviser located in Amherst, New York. Registration does not imply a certain level of skill or training. Nottingham and its representatives are in compliance with the current registration and notice filing requirements imposed upon SEC registered investment advisers by those states in which Nottingham maintains clients. Nottingham may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. For information pertaining to the registration status of Nottingham, please contact Nottingham or refer to the Investment Advisor Public Disclosure Website (www.adviserinfo.sec.gov). Any subsequent, direct communication by Nottingham with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.
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