Editor’s letter

Any fund manager worth his salt these days will caveat his portfolio offeringswith the phrase “past performance is not an indication of future returns”.Investors would do well to heed these few words of small print as the creditmarkets approach the end of the year, since it’s abundantly clear thatthe stellar returns posted by corporate bond funds in 2003 would be far-fetchedexpectations for 2004.

As Rick Rieder, global head of credit at Lehman Brothers, explains in this month’sQ&A, generating significant outperformance in 2004 has been next to impossible.Tight spreads, combined with a lack of diversified supply and only slight differencesin performance between sectors, rating categories and maturity profiles, havecreated an uphill battle for fund managers looking to generate meaningful returns.

So it seems that investors will need to redefine their view of “meaningfulreturns” in the context of 2004’s credit market. We asked Riederto come up with a number; turn to page 18 for his answer.

Richard A. Bravo, Editor