How to Effectively Evaluate Investment Offerings

• Dec 1, 2020
• By Carrie Helmle

Excess liquidity, net interest margin compression and a low-rate environmenthave made the search for investment yield top of mind for many financial institutions and their investment managers. However, it is critical to remember that simple measures of ?yield? can have the unintended effect of keeping investors misinformedas to a portfolio?s true risk/return profile. As you can see in the chart below, topline yield may be misleading as assets with similar ? or even the exact same ? yield on the surface may have very different risks, which can impact their actual returns over time. Risk-adjusted spread analysis levels the playing field in the investment universe and allows institutional investors to examine investment selections on a relative value basis.