#TheZero

Zerois both a number and a concept and as such,Zerois critically important.

But asZero数量,更与benchma有关rk interest rates and returns on bonds, its importance cannot be understated. At the beginning of what could be a prolonged period of policy fueled financial repression, we will all have to focus onZero，它对投资决策的影响及其对资产拨款的影响。我们只开始看Zeroseverywhere.

At its most basic level,Zerois the absence of anything; that absence can be a hard concept to explain. Most simply, the absence of things can be taught to children, much in the same way I taught it to my brother when I took all his toys away.

也许他会认为这是诗意的正义的concept of taking away, until nothing remains, is my focus here. Today,#TheZeromeans simply this, that nothing is left.

The CIRCLE of life

当基准收益率接近零时，没有收入表现出零利率政策（ZIRP）。在这种情况下，基本60/40投资组合策略似乎激发了比答案更多的问题。我们可以在增长和安全之间实现平衡吗？将债券债券是否持续抵消股权波动率？我们如何赚取收入？如果基本返回零是零，或负，我们还在寻找alpha吗？或者，我们需要现在重新检查我们承担的风险，以获得该alpha。的确，我们应该重新审视风险的优点，以及他们当前的疗效作为回报发电机吗？显然，有一些基本的数学重新考虑，而不仅仅是在基本层面，而是在投资分配层面，在生命规划层面。#TheZerohas material implications for how we live our lives, not just for our investments.

通过努力将零添加到结尾

I’ve always liked simple concepts. The simple plan: work hard, get a scholarship, educate yourself, get a job, care for your loved ones, save money, invest, retire and live off of the income your invested savings generate. Invested savings, as a simple rule, meant bonds. Using bonds was the plan because you could earn income and maintain your principal. Simple plan, ironclad... or so I thought.

What happens when simple becomes complicated? What happens when the coupon income generated by bonds is close to Zero?

With Zero income, the math no longer works for retirees, not to mention for those that manage pension plans for the benefit of retirees. Furthermore, in a demographically top-heavy society, this problematic paradigm is compounded. If savings do not generate adequate income, you have three options: you must be willing to spend down your savings, you must be willing to reduce your expenses, or you must continue working for a longer period prior to retiring. This reality is becoming more common and I’ve seen a new acronym to represent it, “D.A.D.”, which stands for “Die At Desk”.

This is the impact of “The Zero”, and it will get a lot of attention, it certainly has ours (or mine). Macabre? Yes. Escapable? Definitely.

How we got to Zero

Interest rates for developed countries have been structurally declining. Globalization, low levels of inflation or even deflation, and lower growth rates have all contributed to the multi-decade decline.

Japan, in the 1990s, was the first near-Zero interest rate regime. In 2014, Europe joined Japan, as local rates went beyond Zero into a negative interest rate regime. It is worth noting, in both cases, investment capital flowed to countries with higher structural interest rates, notably the US.

In the US, policy action has resulted in short-term interest rates near Zero, notably during the Global Financial Crisis (GFC). But today, the yield curve is flatter, so it is not only short-term rates that are near Zero.

Central banks are the buyer of last resort, not only for sovereign debt, but now for other corporate debt as well. With little additional yield available for longer term investments (term premium), the search for “any” yield has led to increased demand for more traditional “risk assets”, with a commensurate reduction in credit risk premium for most “run-of-the-mill” fixed income instruments. Facetiously we ask, should we call it fixed “income”, or is it now just “fixed principal”.

笑话像加起来,和他们becoming increasingly less funny. How many times in the last few years have you looked at the term “high yield”, scoffed at it, and thought, “more like medium yield”.

So we agree The Zero is not new... we have seen near-Zero interest rates in Japan as well as in Europe. However, when those local rates declined the US represented a haven of sorts, the higher yielding developed economy... that is not so anymore. We believe with current market dynamics will now write this in neon, ‘眨眼，眨眼，眨眼闪烁’.

联邦储备（美联储）于2008年12月签发ZIRP，并在2015年12月举行零附近的美联储基金利率。现在有什么区别？

Time, for one, and the flatness of the yield curve, for another.

We tend to forget that the term structure of the yield curve offers the markets opinion of the future for interest rates. The flatness of the yield curve today is potentially pointing to a prolonged period of low interest rates.

Low discount rates have also resulted in appreciation of assets, both real and financial. Cheap leverage is available in the government-supported debt markets. So there seems a disconnect between the economy and, valuations, spreads and leverage.

已经有三个主要助推器从估值视角（并推出的产量下降），他们的组合使得产生收入并回归更具挑战性的前景。即：

1. Monetary support
2. 财政支持
3. 恢复周围的看法

Today, the world we sit in feels very uncertain. Even with this uncertainty, it seems compensation for risk is unusually low.

Policy dependence has brought us here, and with very little yield in traditional fixed income, with crowding in traditional “risk assets” like equity, and with correlations pulling together, traditional asset allocations may be in for a reconsideration.

Zero begets Zero?

#TheZerofeels like it’s here to stay. With that, what should not go unappreciated is the impact low rates and low income may have on consumer behavior and, therefore, economic fundamentals.

Let’s take D.A.D., “Die At Desk”, as an example. If investment income is insufficient to support a retiree, a potential retiree must continue to work, likely past the retirement age assumed. The potential extension of working years has significant consequences for the labor pool.

如果每个人都必须永远工作，我们有一个无限扩大的劳动力池。再说一遍，“无限扩大劳动力池”。它肯定很难想象工资通胀，并且有限的通货膨胀意味着更长的利率。

零可以用许多语言拼写相同，但在所有语言中都不是

利率在美国跌至零的影响可能比其他市场所看到的范围更广泛。美国不是一样的。有两个重要的问题，因为零来了美国。

1. The US is big.When other countries have seen their local interest rates depressed, the US often became the harbor for foreign capital flows. The US was the recipient of foreign capital flows when Japan (1999) and when Europe (2014) went to Zero or negative interest rates. At times, the US has been referred to as “the higher yielding developed economy”. To be sure the US is a large country with a lot of debt, including government debt and corporate debt and, as such, foreign capital had a placeto flow, even on a currency unhedged basis. The World Bank captures this in Foreign Direct Investment figures and we see spikes when Japan went to Zero rates in 1999 and when Europe went to Zero rates in 2014.

So, we ask, now with the US now joining the Zero rate party, where does capital flow?

2014年，与欧洲负债政策执行恰逢欧洲的负利率政策执行，对美国公司债务的增加也是企业证券减少信贷风险溢价的一个因素。

2. The US has a larger population，退休症状与采用零或负利率政策的其他国家不同。今天美国的社会安全网和退休条款少于大多数欧洲国家。

从2015年的公共养老金支出的经合组织数据，我们认为养老金支出为GDP的百分比：法国13.9％，意大利16.2％，芬兰11.4％，西班牙11.0％，德国11.0％10％。相比之下，日本为9.4％，美国仅为7％。此外，来自经合组织的老年人贫困利率的数据显示，美国与英国的21％以14％和欧洲国家均为4％至9％。我们的退休福利的结构说明了美国赚钱收入的重要性。

You can add Zero to anything and not change it

If the impact of Zero on income is material, let’s look at the change in bond maths!

Typical return generators for bonds are:

1. Duration
2. Roll-down
3. Coupon
4. 产量蔓延

Durationreturn has dominated returns from a contribution perspective in recent periods and, in fact, has been a huge return contribution over the past four decades. As interest rates have progressively declined, fixed income has produced attractive returns. From where we are today, it is much less likely duration will be a material return driver, and it is worth the time to look at excess returns by sector, how those have evolved through different cycles, as you consider your drivers of return.

Roll-down如果屈服曲线正倾斜，债券的价格可以随着缩短而增加的概念。目前产量曲线非常平坦，因此滚压将对债券的回归贡献更大贡献。值得注意的是，当产率曲线陡峭时，倒置键会导致滚降的较少的益处，并且它们在扁平产量曲线环境中可能更具吸引力。

Coupon债券，价格为PAR，赢得优惠券收入的退货。今天这些优惠券较低，鉴于1年的资金收益率为15个基点（BPS）。优惠券将由产量扩散的水平确定，这也是低的。

产量蔓延是否增加了基准率的风险溢价，建立债券的优惠券。

Each of these sources of return has been material over the past four decades, and each is likely to be far less material going forward, a bit reminiscent of the disclaimer, “past results are not indicative of future performance.”

Zero cushion?

债券中的许多投资者都看着携带和垫子，它提供抗波动或扩大扩大。该概念是：债券生成的产量（或携带）提供返回，但通常提供足够的回报，以便它可以抵消产生的一些膨胀扩展。

Today, yields are very low, and duration has extended materially for corporate debt. With this as a backdrop, the traditional relationship between yield (or carry) and duration is no longer what we are seeing. The cushion carry offers to spread widening is now very low, and with higher duration, the impact, or sensitivity, to yield spread widening is, at the same time, much higher.

Looking back to the early part of the 2000s, investment grade (IG) corporate securities had enough coupon income they could sustain more than 100bps of spread widening and still break even to a Zero percent return. Figure 7 offers a simple measure of the yield, divided by the duration. A yield of 6% for example, divided by a duration of 6 years, would result in a yield/duration of 1%, or 100bps. This is similar to what we saw in the early 2000s. Post GFC, the yield/duration metric increased to 160bps; what a value! Since 2013, the yield/duration declined to 40bps and today it is only 20bps. With yields around 1.5%, and duration near 7.5 years, a 0% return break-even occurs after yield spread widening of only 20bps.

从零到英雄

With traditional yield metrics and return cushion alike, declining, where can attractive return be found? In our view, returns should be married to their risk premium, and the compensation for risk factors can range over time. Some examples are thus:

1. 到期风险溢价- 今天这个溢价接近零。美国国债（长期与短期）得到保证，但达成了成熟风险
2. 信用风险溢价- 随着每个人植入传统风险资产，这些风险溢价也下降，即使具有相当大的经济不确定性。企业信贷IG和高收益是传统的信用风险资产
3. Sovereign risk premium– country credit risk. Emerging market versus developed countries would showcase this risk premium
4. Convexity risk premium– guaranteed US Agency MBS, versus US Treasury notes would be a way to examine this premium
5. Complexity risk premium– structured product versus treasuries or versus corporate credit can be compared
6. Liquidity risk premium– being able to hold and compare public versus private assets

Presently, we see better carry/duration metrics coming from areas such as ABS, CLO and CMBS, rather than the common credit benchmarks (IG credit). For example, today the European ABS index offers more attractive metrics relative to US IG credit than at any point in the last three years, implying that the premium for the complexity is more attractively priced today. This is the benefit of off benchmark assets, or in the words of the poet Robert Frost, “the road less traveled”.

单独观察产量时，可以观察到，对于大多数传统资产，最迅速地减少了屈服于屈服的风险。

Closer to 10 than 0

Some business models, like insurance-guaranteed returns (i.e. annuities), may have to use capital should current income fall below the yield they need for replacement investments as existing investments mature. Pension funds also evaluate their capital contributions using assumptions for returns, these assumptions are closer to 10 thanZero。

Given their required rate of return, there is a prominent case to be made for using alternatives or assets that earn a liquidity premium to achieve additional return through a diversification of risk premium, rather than just additional credit risk.

Regardless, in an environment of Zero, 7% is a tall order.

Over the last two decades, there has been a persistent decline in asset yields below that 7-8% sweet spot. Across the board, it looks like 5% is the new 7%.

鉴于近零的基准率，我们希望投资者需要在今天可容忍的风险因素的范围内更加仔细。

图12显示了许多市场指数和目镜编号，包括对成熟度（YTM）的产率的非常低的水平，以及更高的挥发性水平。仅使用基准测试，我们不能轻易捕捉多样化或资产选择的好处。但我们可以证明欧洲ABS等挥发性产物的较低的益处，或AAA ABS / MBS或AAA CLO的持续时间率为持续时间。对于许多结构化产品令人遗憾的是，没有展示其他比较的指数。但缺乏指数是结构化产品通常提供更引人注目的产量的一个原因。它没有坐在一个主要的基准中意味着它可能会提供更加流动性的保费，就像我们为私人资产所看到的那样。从图12中缺少的显着缺失是房地产债务等有吸引力的多样化剂，根据预Quin，这提供了9％-10％的IRS，波动率较低。

Given today’s level of economic uncertainty, asset owners will need to reconsider how they pursue their required outcomes, and reconsider their exposure risk. To be sure, based on today’s facts and circumstances: policy support, idiosyncratic risk and disruption, there are factors worth emphasizing and factors worth de-emphasizing. There is merit to taking some risk exposure, specifically exposure that will benefit from accelerating trends.

There will also be opportunities created as the world changes post Covid-19. Access to opportunity, has a place in an investment portfolio. But, there is merit to diversifying that exposure, given uncertainty. By contrast, in a low carry, low rate environment, de-emphasizing duration may be desirable for some, especially if duration is unlikely to play the same role within an asset allocation that it has in other cycles.

We strongly believe that evaluating solutions for#TheZeroincludes a prudent assessment of factors that can and should be emphasized: stronger fundamentals, better tolerance to volatility, and lower sensitivity to interest rates. Equally required is an assessment of factors that should be de-emphasized. This analysis should be framed within the context of the unique interest rate environment, with a mind for differences from the past that may manifest.

在投资组合中，每个资产应以其强调的因素为目的。成功战略的积木可能需要新的思考来源的回报，例如：快速流动性，携带，机会或恢复。

Fast liquidity:对于大多数人来说，投资组合的某些组成部分需要用于流动性。流动性是一个面积，需要考虑各种市场的变化和它们内部的证券。政府或企业债务相对于经销商库存增加，主要的考虑因素的资产负债表。但在2020年3月，经验与预期不同。通过一套新的规则，重新评估流动性及其来源非常重要。维持尽可能少的蔓延风险的流动性口袋，为投资者提供投资者，甚至是寻求返回的投资者，可以灵活地从进一步的错位中受益。我们相信这一有利于不承担违约风险的政府购买的证券，例如国债或机构保障MBS。

Capitalizing on opportunities as valuations change can be a critical component to seeking to achieve higher returns. This is likely to involve liquidity or complexity premium.

机会：Based on their exposure to certain themes or trends, some products benefit from opportunity, either right now, or down the road. Opportunities today are more likely to include those that are housing related, but future opportunities will include real estate related, consumer related and corporate related. It is important to remember, not all opportunities come at once. For now, it is clear to us that housing benefits from a quality of life trend, and the shelter-in-place demand. But even thinking beyond the obvious, if retirees question the ability of savings to generate income, they may look to lower their cost of living. If financial assets are expected to generate a substandard/low return or low income, individuals may recalibrate their retirement by changing the cost/or expense side of their equation. It is equally possible they move investments, to a barbell of liquidity (for safety) and less liquid assets such as an investment in a home in a desired retirement location, that can be used in the interim to earn rental income.

恢复：Other types of opportunity can be driven by mispricing. Emotional bias or fear, can be a principal driver of opportunity.

监管可以是另一个。恢复机会往往是位于错位或不确定的市场中的“婴儿抛出浴室”。房地产市场面临改变的影响是一个很好的例子。通过这种方式，可以在两个有利的子扇区（工业）和归属的子部门（零售，办公室或酒店）中创建一系列机会。

Carry:Assessing the carry of a bond in consideration of its duration and potential volatility should be a key driver. If this is desirable, our view is that a sector like ABS affords these characteristics more so than many other sectors.

Evolution:Lastly, liquidity takes us into another dimension of risk premium. The terms of liquidity can range in terms of return and in terms of lock-up. This is another tool that could be used to improve or reduce risk within a portfolio in#TheZero,and is likely a potential area that is critical to assess, given that in markets where capital provision is limited, or less efficient, excess return is more likely.

In looking across the landscape, there is a need to solve the problem of#TheZero。收入市场的参与者相似，需要考虑超越传统市场的回报的多样化来源，或传统思维。

It has been said that “underneath every revolution lay a Zero”, and from an asset allocation perspective, this time is no different. We believe that we are just now at the beginning of changes to fixed income asset allocations in order to more aptly navigate#TheZero。

It was the poet, Vanilla Ice, who said, “better drop that Zero and get with the hero”. In the context of portfolio allocations, this means with very low structural yields and returnswe must consider more risks, rather than just more risk。随着我们的指导，我们可以“停止，协作，听”。考虑一个更多样化的篮子不太相关的资产，以嵌入弹性。我们相信这是当天的顺序。

With a wider range of possibility, assessment of liquidity becomes a more important lever. To make available a broader toolkit, managers may need new structures to provide access to some of the asset classes that have typically been accessible only to larger investors. For some there will be more material changes to create a diverse portfolio by using a range of alternative or private assets, non-traditional asset classes, or structures. For others it maybe be a first step into considering a non-benchmark sector with a better income or maturity profile.

This re-assessment is set in an environment of new challenges. The easy sustainability of this recovery may be challenged.

甚至预期美国财政计划的延迟as altered expectations. Unemployment perceived as temporary will begin to shift to unemployment perceived as permanent. Policies that helped companies and consumers bide time through non-payment will expire, and we may see another wave of layoffs and increases in bankruptcy filings. We believe these challenges will begin to mark the second phase of this economic crisis and recovery, as we begin to see new data, we may initially see the #deathofoptimism. There will likely be renewed opportunities to benefit from structural changes taking place in the economy, be they social, political or economic.

Generating successful investment outcomes with an uncertain economic backdrop is hard. With high asset prices, and with very little income offered in traditional markets, it is very hard. But as Tom Hanks said inA League of Their Own是一部关于女性在WWII期间接管美国职业棒球联盟的电影，“It’s supposed to be hard. If it wasn’t hard, everyone woulddo it. The hard… is what makes it great。“- 棒球没有哭泣。

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Schroder Investment Management North America Inc.
7 Bryant Park，纽约，NY 10018-3706

For more information please visit our website atwww.schroders.com/us/institutional。

Twitter:@SchrodersUS

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重要信息：此处包含的意见和意见是作者的意见和意见，并不一定代表Schroder Investment Management North Americal Inc.的（Simna Inc.）House View。11月2020年11月发布。这些观点和意见可能会有所变化。提到的公司/发行人/部门仅供参考，不应被视为购买/销售的建议。本报告仅供信息目的，并非在任何尊重中作为宣传材料。该材料并非旨在作为购买或销售任何金融工具的要约或招揽。该材料不旨在提供，不应依赖于会计，法律或税务咨询或投资建议。这里的信息来自我们认为可靠但Simna Inc.不保证其完整性或准确性。对于从第三方获得的事实的错误，无法接受任何责任。在制定个人投资和/或战略决策时，不应依赖于文件中的视图和信息。本文档中所述的意见包括一些预测意见。 We believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee that any forecasts or opinions will

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