For the last decade, stimulative levels of interest rates have led to historic low levels of bond defaults and investors have been well compensated to take on additional credit risk on the margin. As this stimulus is removed, it is probable that we are returning to a more typical credit environment, one where the number of bond defaults and credit degradation is higher than in recent years. Northern Capital has developed powerful new credit risk modeling capabilities to evaluate credit for corporate bonds that are not solely reliant on ratings agencies.

The SEC recently adopted rule changes on February 15, 2023, to shorten the settlement cycle from T+2 to T+1. Many institutional investors, including registered investment advisors, may have limited visibility into the risks and challenges associated with operations, clearing, and settlements. Assessing your organization’s operational readiness can help identify potential gaps or inefficiencies in systems and processes. This can contribute to the development of improved communications, better workflows and help to identify technology solutions to address them.

The combination of increased volatility in central bank rates and inflation expectations require a proactive approach to managing risk. Scenario analyses and simulations are used to test the resilience of investment strategies against a variety of possible future interest rate regimes and shocks. This enables portfolio managers to evaluate which portfolios would perform the best over the expected investment horizon.

Regulators in the U.S. and Europe have established new rules outlining comprehensive best execution standards across asset classes. Fixed income execution analysis tools are becoming an increasingly valuable resource for buy-side participants. Although U.S. broker-dealers are not obligated to disclose markups to institutional investors, they are permitted to provide this information on a voluntary basis. Markup disclosures and prevailing market pricing information support investment managers' efforts with their best execution evaluation and can contribute to the disclosing firm's culture of transparency and objectivity.

ETF investors have an expectation of instant liquidity, similar to company stocks on an exchange. The problem, however, is that the underlying securities in the ETF have no such liquidity. Like stocks, ETFs trade throughout the day. Extremes in price fluctuation have been seen during market anomalies, such as the so‐called Flash Crash. While significant deviations in value are relatively infrequent, they are not unheard of. In a retail‐dominated sector, finding willing buyers in a 'fire sale' is more difficult when institutions aren't a significant player. It may become a situation where liquidity is only present when you don't need it, but disappears when you need it the most.