Legal lethargy

Constraining buy-side institutions to hold only investment-grade securities uses a nearly century-old metric with limited contemporary relevance. David Rowe supports one modest proposed reform


Financial regulation has long aimed to limit fiduciaries' risk-taking to appropriate levels. In particular, for pension and certain endowment funds, this is intended to provide assured long-term income support for beneficiaries. Such funds are often constrained to invest only in investment-grade securities, and the underlying assumption is that such securities constitute a fundamentally low-to-moderate risk position. When the securities in question were basically corporate bonds, this was a

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