BMO Global Asset Management White Paper: Finding Income in a Low-Yield Environment
Organization Releases White Paper; Launches Microsite to Help Investors Generate More Investment Income in Low Interest Rate Environments
2013-03-05 16:14:11 -
CHICAGO, IL -- (Marketwire) -- 03/05/13 -- BMO Global Asset Management recently released its latest white paper, Liquidity Tiering for High Yields in the Tax-Free Market : www.bmofundsus.com/taxfree
. The white paper addresses the wide-spread problem that many investors currently face in trying to find income in a low-yield environment and identifies solutions that use proven, yet rarely discussed methods.
The report notes that, as the Federal Reserve Board keeps short-term rates unusually low with no change in sight, investors are searching for creative ways to balance their income and liquidity goals. At the moment, many are choosing low-yielding U.S. Treasurys, money market funds and bank deposits. According to BMO Global Asset Management, the wiser and more flexible solution would be to tier fixed income investments according to liquidity.
"Despite continued market volatility, it's inherently risky to limit a portfolio to cash, money market funds and U.S. Treasurys because investors lock in yields that are too low to meet their financial goals," said Duane McAllister, Tax-Exempt Portfolio Manager, BMO Global Asset Management. "With a diversified portfolio allocated according to liquidity needs, investors can achieve an optimal balance between stability and yield, regardless of market conditions."
The white paper also highlights that, in today's record low interest rate environment, the so-called "risk-free" yield associated with U.S. Treasurys is anything but safe. "In fact, these historically low interest rates will certainly result in negative returns on an inflation-adjusted basis," according to McAllister. "Those investments will fail to keep pace with inflation. And in real terms, investors will lose money."
To prevent such losses, the white paper supports liquidity tiering -- a method of enhancing money market returns with income from short- and intermediate-term fixed income investments without adding risk. This approach divides cash and other fixed income assets into four distinct tiers: Operating Cash, Core Reserve Cash, Short-Term Assets and Strategic Assets. In turn, the assets in each tier can be invested the appropriate strategy. By design, this methodology can also provide tax-advantaged income.
BMO Global Asset Management offers a range of solutions that can provide investors with the advantages of liquidity tiering. These include:
- Operating Cash solutions - BMO Tax-Free Money Market Fund provides daily liquidity to meet current needs.
- Core Reserve Cash solutions - BMO Ultra Short Tax-Free Fund uses a slightly longer duration to enhance yield. It focuses on high-quality municipal issues so that current income provided is largely exempt from federal income tax.
- Short-Term Asset solutions - BMO Short Tax-Free Fund focuses on intermediate-term investment grade bonds and notes to maximize total return consistent with current income.
- Strategic Asset solutions - BMO Intermediate Tax-Free Fund provides a high level of current income free from federal income taxes. It focuses on high-quality municipal bonds to preserve capital.
The white paper advises investors considering liquidity tiering to work closely with an experienced financial professional who has access to cash management expertise. It also urges choosing actively managed solutions that can boost their portfolios' effectiveness and safeguard against market volatility.
BMO Global Asset Management Launches Microsite
BMO Global Asset Management also announced that it has launched a microsite, www.bmofundsus.com/taxfree : www.bmofundsus.com/taxfree
, containing a number of useful resources for investors as they seek ways to generate more investment income in a low-yield rate environment.
To access the full white paper report, visit www.bmofundsus.com : www.bmofundsus.com/
About BMO Global Asset Management
BMO Global Asset Management is a global investment manager with more than $110 billion in assets under management as of October 31, 2012, including the BMO family of mutual funds.
Our multi-disciplined teams are based in Toronto, Chicago and Milwaukee, and our network of world-class boutique managers is strategically located across the globe. They include Monegy, Inc., Pyrford International Ltd., Lloyd George Management and Taplin, Canida & Habacht, LLC. BMO Global Asset Management delivers service excellence from offices throughout North America, and in London, Abu Dhabi, Mumbai, Beijing, Shanghai, and Hong Kong. Our approach has led us to be recognized by Pension & Investments as one of the world's largest 100 asset managers based on combined assets under management as of December 31, 2011.
We are a part of BMO Financial Group (NYSE: BMO), a fully diversified financial services organization with $525 billion total assets and more than 46,000 employees as of October 31, 2012.
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