Reminiscences of a Bond Operator: A Information to Investing in Company Debt. 2024. Mark A. Rieder. Independently printed.
New and seasoned company bond traders can be delighted to get acquainted with Mark Rieder’s conversational narrative and clear presentation of complicated analytical concepts in Reminiscences of a Bond Operator. When requested in regards to the high reference work in bond investing, I refer my colleagues and college students to Frank J. Fabozzi’s The Handbook of Fastened Earnings Securities.[1] As complete a magnum opus as Fabozzi’s guide is, Rieder’s guide, launched in 2024, provides worth as a extremely technical information enhanced by private perception into analyzing company bonds and personal credit score, in addition to structuring and managing a debt portfolio.
Rieder maintains that anybody can assemble a company bond portfolio, however solely a talented investor can persistently choose the right bonds to generate alpha with out incurring important losses. After studying this guide and having 30 years of expertise in analyzing particular person company bonds and managing fixed-income portfolios, I can say that I discovered contemporary strategies of analyzing particular person points and structuring complete portfolios that may instantly affect my investing actions.
Mark Rieder just isn’t a family title to analysts and portfolio managers the way in which Frank Fabozzi is. Nonetheless, his guide deserves a spot within the universe of company bond sensible guides as issuers come and go and the world of credit score adjustments, such because it did with the explosion in non-public credit score after the 2008 Monetary Disaster. He has a wealthy background within the evaluation and administration of fastened earnings, from his early days at Deloitte & Touche and Goldman Sachs to his tenure as Managing Director and Lead Company Bond Portfolio Supervisor at GIC, the sovereign wealth fund of the Authorities of Singapore. In 2023, he based La Mar Belongings, a worldwide multi-strategy credit score supervisor. Based mostly on his lengthy tenure by the Monetary Disaster and past, he confidently speaks from a deep expertise within the trenches of company credit score.
Take into account that Reminiscences just isn’t a primer in company fixed-income investing, but it begins with an Overview of the Monetary Markets (Half I). Subsequent components of the guide include The Analysis Course of (Half II), Portfolio Administration (Half III), Superior Matters in Portfolio Administration (Half IV), and lastly, Classes Realized and Concluding Ideas (Half V).
As rudimentary because the Overview could appear in its description, it provokes a lot helpful fascinated by the scale and efficiency of the bond market, the biggest issuer — the USA — and its rising financing wants, the demand for company debt in a zero-interest fee coverage (ZIRP) setting, and the refinancing of such low-interest debt. The purpose of the guide is summarized on web page 40: “Savvy traders alter their portfolios by rising credit score publicity when unfold and yields are wider, then cut back publicity when unfold and yields tighten.” If solely bond investing have been so easy. That’s the reason the writer offers in-depth workout routines and case research within the coronary heart of the guide.
Inside The Analysis Course of (Half II), I discovered that Chapter 9: Analyzing Firm Money Flows and Chapter 10: Rieder’s Matrix retains evaluation on observe for one function: minimizing unknown details about the potential funding to make the best-informed determination on the time the commerce is executed.
Inside Portfolio Administration (Half III), Chapter 13: The Distinction Between Coupon, Yield, and Bond Returns offers sound perception into deciding on points primarily based on strikes in benchmark charges and credit score spreads. It addresses hybrid securities at size, elevating a subject that not often enters discussions of fixed-income devices. Rieder encourages traders to think about hybrids for increased yields, acknowledging all their dangers in comparison with options within the fixed-income market.
The next chapters (inside Portfolio Administration) are explicitly geared towards institutional traders: Chapter 17: The Rise of Credit score Buying and selling Widgets and Chapter 18: Non-public Credit score Alternatives and Challenges. The latter explores an asset class that doubtlessly creates conditions with no limits on leverage. Rieder raises many vital questions associated to personal credit score’s surge over the previous decade:
• Does non-public credit score have a decrease default profile than public debt?
• Will defaults enhance as rates of interest climb?
• Can firms that make the most of non-public credit score restructure advert infinitum?
• Might there be systemic threat stemming from the frenzy of life insurers into non-public credit score?
• Are there any liquidity considerations?
The writer means that the evolution of personal credit score markets will result in a major convergence between liquid and personal credit score. Greater than a decade of speedy development in non-public credit score issuance and funding might be explored in a future guide on this subject.
Superior Matters (Half IV) applies to traders and analysts in all asset courses. It addresses subjects corresponding to monetary engineering, chapter, reorganization, and, my favourite, credit score portfolio threat administration. It additionally offers with a topic many people have skilled however not often will get talked about: inheriting a portfolio.
I do have one criticism of this complete guide. An index ought to have been included. Regardless of the writer’s inclusion of in depth notes and my bookmarking of quite a few pages, I steadily discovered myself trying to find particular subjects and people referenced.
To conclude, Reminiscences is a pretty information to company bonds that’s professionally centered however accessible to analysts and portfolio managers of all expertise ranges. It additionally serves as a launching level for deeper evaluation of fixed-income subjects that might be affected by elevated market volatility.
1. Frank J. Fabozzi, et al., The Handbook of Fastened Earnings Securities, ninth ed, (McGraw Hill, 2021).
