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 concerning the prime reference work in bond investing, I refer my colleagues and college students to Frank J. Fabozzi’s The Handbook of Mounted Revenue Securities.[1] As complete a magnum opus as Fabozzi’s e book is, Rieder’s e book, 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 constantly choose the right bonds to generate alpha with out incurring important losses. After studying this e book and having 30 years of expertise in analyzing particular person company bonds and managing fixed-income portfolios, I can say that I discovered recent strategies of analyzing particular person points and structuring whole portfolios that can 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 e book 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 personal credit score after the 2008 Monetary Disaster. He has a wealthy background within the evaluation and administration of mounted revenue, 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 world multi-strategy credit score supervisor. Primarily based on his lengthy tenure via the Monetary Disaster and past, he confidently speaks from a deep expertise within the trenches of company credit score.
Needless to say Reminiscences just isn’t a primer in company fixed-income investing, but it begins with an Overview of the Monetary Markets (Half I). Subsequent elements of the e book 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 seem in its description, it provokes a lot helpful interested by the dimensions 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) atmosphere, and the refinancing of such low-interest debt. The purpose of the e book is summarized on web page 40: “Savvy traders modify their portfolios by rising credit score publicity when unfold and yields are wider, then scale back publicity when unfold and yields tighten.” If solely bond investing have been so easy. That’s the reason the creator supplies in-depth workout routines and case research within the coronary heart of the e book.
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 monitor for one goal: minimizing unknown details about the potential funding to make the best-informed resolution on the time the commerce is executed.
Inside Portfolio Administration (Half III), Chapter 13: The Distinction Between Coupon, Yield, and Bond Returns supplies sound perception into choosing points based mostly on strikes in benchmark charges and credit score spreads. It addresses hybrid securities at size, elevating a subject that hardly ever enters discussions of fixed-income devices. Rieder encourages traders to think about hybrids for larger yields, acknowledging all their dangers in comparison with alternate 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 personal 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 personal credit score restructure advert infinitum?
• May there be systemic danger stemming from the push of life insurers into personal credit score?
• Are there any liquidity issues?
The creator means that the evolution of personal credit score markets will result in a big convergence between liquid and personal credit score. Greater than a decade of speedy progress in personal credit score issuance and funding may very well be explored in a future e book on this concern.
Superior Matters (Half IV) applies to traders and analysts in all asset lessons. It addresses subjects equivalent to monetary engineering, chapter, reorganization, and, my favourite, credit score portfolio danger administration. It additionally offers with a topic many people have skilled however hardly ever will get talked about: inheriting a portfolio.
I do have one criticism of this complete e book. An index ought to have been included. Regardless of the creator’s inclusion of intensive notes and my bookmarking of quite a few pages, I incessantly discovered myself looking for particular subjects and people referenced.
To conclude, Reminiscences is a sexy information to company bonds that’s professionally targeted 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 may very well be affected by elevated market volatility.
1. Frank J. Fabozzi, et al., The Handbook of Mounted Revenue Securities, ninth ed, (McGraw Hill, 2021).
