Word: portfolios
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Dates: during 2000-2009
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Harvard slashed two-thirds of its holdings in publicly traded stocks during the three months ending Dec. 31, an indication that the University is reshuffling its portfolio following unprecedented losses in the ongoing financial crisis...
While the disclosed assets represent only a small fraction of the University’s total holdings, the shift hints at possible changes in the breakdown of the University’s investment portfolio, as Harvard’s money managers seek to navigate continuing market turmoil...
Emerging market equity represented 10 percent of Harvard’s total portfolio and returned 7.6 percent in the fiscal year ending last June 30, according to University reports. Fixed-income bonds represented 13 percent of the University’s holdings, while real assets—such as real estate and investments in timber and agricultural land—comprised 26 percent...
...wait, there's more. Unlike other CDOs, Strata is a so-called single tranche CDO. Most CDOs own hundreds of millions of dollars of loans. Those loans are pooled together and then various bonds are sold based on the portfolio. But all the bonds are not the same. They are stacked based on risk. The highest tranche bond gets paid its dividends based on the first loan payments that come in the door. Bonds at the bottom of the stack get paid last, which means those investments are wiped out first if borrowers fail to pay back their loans. Those...
...That's basically the scenario for Strata. Its investors don't owe a dime on the first $130 million (or 13%) in losses on the $1 billion bond portfolio. That may seem like it gives Strata investors a lot of protection. But if just 15% of BofA's $1 billion imaginary bond portfolio, which are real bonds just not necessarily owned by BofA, goes bad, then 100% of the investment in Strata is toast. Because of that, Moody's rated the bond the equivalent of BBB-, which is the lowest investment grade rating the firm...