这句话应该如何理解呢？

问题如下：

Spencer Hale is a reporter for “Advisor’s Monthly,” a newsletter that features select mutual fund managers and is circulated to registered investment advisers (RIAs). Hale reports on managers who have performed well over a three-year period. He focuses on their investment style, philosophy, and process while highlighting some personal traits to make the reading entertaining. Because the newsletter is educational for RIAs who are generalists across asset classes, Hale also incorporates some technical material in the story. He published the following article subsequent to a recent interview:

Harlow Choate is the portfolio manager of the Credit Opportunities Fund (COF) at Ipswich Advisors, LLC. Choate navigates his fund with the same dexterity as his 46-foot sloop, scouring the markets for attractive credit securities. He describes his strategy approach as having “an objective to beat the Barclays US Investment-Grade Corporate Index by 100 basis points (bps) annually with a tracking error volatility of 200 bps. We evaluate the relative value of securities within countries and sectors using our own assessment of credit-related risks and use expected excess return as the measure to make relative value decisions. We consider overall corporate profitability, default rates, and industry trends to allocate to industry sectors and when adding an asset class, such as high-yield bonds. Investments are not restricted based on companies’ business practices.”

Choate elaborates on the different risk considerations he attributes to investment-grade bonds compared to high-yield bonds, “Relative to high-yield bonds, investment-grade bonds are more sensitive to interest rate changes and credit migration risk, resulting in credit spread volatility. High-yield bonds are not as sensitive to interest rates, and, given the potential for actual credit losses caused by default, monitoring outright market value of the position is more critical with high-yield bonds than with investment-grade bonds.”

Choate is nimble with seafaring tools, such as the compass and sextant, so it is no wonder that he employs a number of specialized tools when investing in bonds. He shares his favorite measures to assess how much he is being compensated for the credit-related risks he takes, saying “There are a number of credit spread measures that can be used when evaluating risky bonds. My preference is to use a measure at the security level that uses a spread over a linear interpolation of the yields of two on-the-run government bonds. At the portfolio level, I prefer to use a measure that applies to a diversified group of securities, whether they have embedded options or not.”

Similar to many fixed-income investors, Choate envisions the glass half empty. He is concerned about the challenging market environment, liquidity, and a number of black swan or tail risks that could potentially impact the performance of his investments. He outlines for Hale the precautions he can take in the portfolio and specifically outlines three key considerations:

• Consideration 1: Liquidity risk has increased markedly for corporate bonds, particularly since the global financial crisis. We assess liquidity through a number of measures, such as the bid–ask spread, trading volumes, and the impact of funds flows. We manage liquidity through position sizes, the use of Treasuries, exchange-traded funds, and derivatives.

• Consideration 2: Tail risk events are challenging to model or predict ahead of time. Scenario analysis can provide an indication of how a portfolio would perform under certain conditions, such as spreads widening by a certain amount across the credit curve. The positions in a portfolio can be stressed in scenario analysis assuming similar outcomes of a past crisis recur.

• Consideration 3: It is difficult to hedge tail risks through portfolio diversification, and it can also prove too costly. We prefer to hedge using such derivatives as credit default swaps, which have a very low cost.

Choate does not limit his investments strictly to domestic issuers. He prefers to traverse the global waters for opportunities. His rationale is fairly straightforward: “The credit market is global in nature. We evaluate opportunities across regions and countries, which include emerging markets. We are especially keen on emerging market credits, which can provide excess returns that outperform the domestic and global developed market indexes. Because the emerging market credits are not included in the performance benchmark, we limit the maximum exposure to this asset class and buy them in either USD or the local currency depending on the total expected return of the transaction.”

Choate’s final comments to Hale detail how he also looks for structured financial instruments that offer diversification benefits and attractive expected returns. These are listed in Exhibit 1, which shows recent COF portfolio positioning relative to the benchmark and reflects various opportunities Choate has uncovered across several markets.

Exhibit 1

COF Portfolio Holdings as of 12/31/xx

Question

Which of Choate’s considerations regarding the precautions he can take in the portfolio is least likely correct?

选项：

A.Consideration 2 B.Consideration 1 C.Consideration 3

解释：

Solution

C is correct. Consideration 3 is incorrect. Hedging tail risks through portfolio diversification is not difficult to implement and only has modest incremental cost. Hedging with derivatives, such as credit default swaps, is effective but costly.

A is incorrect because Consideration 2 is correct.

B is incorrect because Consideration 1 is correct.