Once, if an advisor wanted corporate bonds for a client there were three choices: buying them directly; in a unit trust; or a mutual fund. Is there an easier, more elegant way to invest in corporate fixed-income? Tom Ricketts, president/CEO of Chicago-based Incapital LLC, thinks so. He co-founded the firm in 2000, and InterNotes in 2001, enabling advisors to buy newly issued, investment grade, corporate securities at par, in denominations of $1,000. Ricketts spoke with Staff Editor Kate McBride in late September on what advisors are doing with corporate fixed-income securities.
What trends are you seeing among the broker/dealers?
In our product, January was the lowest month of sales we've had in the six years of Incapital, but August was one of the top months in sales in six years, so what we have seen is a sentiment shift. I think that goes back to the fact that it's not [that] just everyone expects the Fed to keep raising rates anymore–the next Fed move will be determined by economic data.
There's a risk that if the Fed thinks the economy is weakening, the first step it will take is to start lowering short-term rates. I think advisors are becoming aware that there's an opportunity cost to leaving all their clients' money in cash.
