Reminiscences of a Bond Operator: A Information to Investing in Company Debt. 2024. Mark A. Rieder. Independently revealed.
New and seasoned company bond buyers shall be delighted to get acquainted with Mark Rieder’s conversational narrative and clear presentation of advanced analytical concepts in Reminiscences of a Bond Operator. When requested concerning the high reference work in bond investing, I refer my colleagues and college students to Frank J. Fabozzi’s The Handbook of Fastened 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 persistently 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 contemporary strategies of analyzing particular person points and structuring whole portfolios that can instantly affect my investing actions.
Mark Rieder shouldn’t be a family title to analysts and portfolio managers the best way 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 non-public credit score after the 2008 Monetary Disaster. He has a wealthy background within the evaluation and administration of fastened 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 by the Monetary Disaster and past, he confidently speaks from a deep expertise within the trenches of company credit score.
Needless to say Reminiscences shouldn’t be 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 encompass 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 eager about the scale and efficiency of the bond market, the most important 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 e book is summarized on web page 40: “Savvy buyers regulate their portfolios by growing 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 gives in-depth workouts 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 observe for one objective: 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 gives sound perception into choosing points primarily based 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 buyers to contemplate 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 buyers: 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 probably creates conditions with no limits on leverage. Rieder raises many vital questions associated to non-public 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 corporations that make the most of non-public credit score restructure advert infinitum?
• Might there be systemic danger stemming from the push of life insurers into non-public credit score?
• Are there any liquidity issues?
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 fast progress in non-public credit score issuance and funding may very well be explored in a future e book on this subject.
Superior Matters (Half IV) applies to buyers and analysts in all asset lessons. It addresses matters comparable 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 writer’s inclusion of in depth notes and my bookmarking of quite a few pages, I regularly discovered myself looking for particular matters and people referenced.
To conclude, Reminiscences is a pretty 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 matters that may very well be affected by elevated market volatility.
1. Frank J. Fabozzi, et al., The Handbook of Fastened Revenue Securities, ninth ed, (McGraw Hill, 2021).
