Where are rates going? What should investors do with their fixed income portfolios? The first is actually the tougher question. Market pundits have proved that predicting the path of rates is somewhat like forecasting the weather. Often the market doesn’t behave as expected, which makes market timing risky, if not costly. What should investors do with a fixed income portfolio? Our answer is simple: Rather than try to outguess the market, investors should seek to craft an all-weather bond portfolio, one that delivers the benefits of fixed income investments in a variety of scenarios.
Our model for fixed income portfolio construction, which we call the “Fixed Income Triangle,” can serve investors well across all cycles and seasons (Exhibit 1).
Complement your core. With an absolute-return-oriented approach to fixed income investing, invests flexibly across a diverse set of fixed income strategies, taking advantage of the best opportunities across all market environments.