Corporate Bonds Most Overpriced Asset
Deviating slightly from his drumbeat that people should expect lower returns going forward, Bill Gross looks at whether there are any asset classes that look like they have no upside potential left. He ends up focusing on corporate bonds and decides that their spreads are within a few basis points of their limit. He also makes an argument that alpha creation by leveraged derivatives (e.g., CPDOs) is now limited to around 2% without risking substantial principal (bad news for hedge funds
whose fees often start at 2% and go up from there). And if the spread drops by a few more basis points even that alpha will go away.
This entry was posted by David on December 1, 2006 at 3:43 pm, and is filed under Investing. Follow any responses to this post through RSS 2.0.Responses are currently closed, but you can trackback from your own site.