Global Fixed Income Blog
Fixed Income Perspectives
An appropriately diversified fixed income portfolio across core, core complements and extended sectors can help investors generate income, provide diversification to equities and lower overall portfolio volatility.
Extended sectors
Seek income and/or total return
Core complements
Seek reduced fixed income volatility
Core holdings
Seek lower volatility and diversification to equities
Get ahead of “what ifs” with Scenario Analysis
Fixed Income Perspectives
Portfolio Manager James McNerny discusses the Fed hiking cycle and identifies opportunities on the short end of the curve.
Every December, we publish our predictions for the year ahead. We believe these predictions have at least a 1-in-3 probability of materializing – making them realistic, while not necessarily our base case, and a surprise relative to investor positioning.
The Bloomberg US Aggregate Index (the Agg) has a long history and is solidly entrenched as a benchmark for bond performance. However, since launching in the mid 1980s, its rules-based construction has grown antiquated and no longer delivers the well-diversified portfolio many believe it to be. Instead of accepting passive strategies that follow this index, investors may prefer strategies deliberately designed for their desired outcome — active Core and Core Plus.
As Fed policy shifts, fixed income strategies need to manage changing correlations between risk assets and duration.
The Bloomberg US Aggregate Index (the Agg) has a long history and is solidly entrenched as a benchmark for bond performance. However, since launching in the mid 1980s, its rules-based construction has grown antiquated and no longer delivers the well-diversified portfolio many believe it to be. Instead of accepting passive strategies that follow this index, investors may prefer strategies deliberately designed for their desired outcome — active Core and Core Plus.
Rick Figuly, lead Portfolio Manager of the Core Bond Strategy, discusses the latest in bond investing, including the inflation and rates outlook, opportunities agency-backed securities and commercial real estate valuations.
Fixed income securities are subject to interest rate risk. If rates increase, the value of the Funds’ investments generally declines. The risk of defaults is generally higher in the case of subprime mortgage- related and asset-backed securities that include so-called “subprime” mortgages. The structure of some of these securities may be complex and there may be less available information than other types of debt securities. These securities that may or may not be guaranteed by governments and their agencies, supranational organizations, corporations, or banks. The value of these assets will be influenced by factors affecting the assets underlying such securities. During periods of declining asset values, the asset-backed securities may decline in value. Futures contracts, swaps, options and derivatives often create leverage, thereby causing the Fund to be more volatile than it would be if it had not used derivatives. Emerging markets and foreign/international securities involve special risks, including economic, political and currency instability — especially in emerging markets. The Funds’ investments in emerging markets could lead to more volatility in the value of the Funds’ shares. The small size of securities markets and the low trading volume may lead to a lack of liquidity, which leads to increased volatility. Emerging markets may not provide adequate legal protection for private or foreign investment or private property. Securities rated below investment grade (i.e., “high yield” or “junk bonds”) are generally rated in the fifth or lower rating categories of Standard & Poor’s and Moody’s Investors Service. Although these securities tend to provide higher yields than higher-rated securities, there is a greater risk that the Funds’ share prices will decline. Short sales: There is no guarantee that the use of long and short positions will succeed in limiting the Funds’ exposure to domestic stock market movements, capitalization, sector swings or other risk factors. Investment in a portfolio involved in long and short selling may have higher portfolio turnover rates. This will likely result in additional tax consequences. Short selling involves certain risks, including additional costs associated with covering short positions and a possibility of unlimited loss on certain short sale positions. Investments in equity securities may rise or fall because in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. When the value of a fund’s securities goes down, an investment in a fund decreases in value.