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Fixed income strategies for today — and tomorrow

IncomeLiquidityReturnDiversification

Traditionally, fixed income has played four key roles within investors’ broader portfolios, providing:

  • Income to meet investors’ short- and long-term obligations
  • Return, seeking to enhance the total return of the overall portfolio
  • Liquidity to meet cash flow needs and provide the overall portfolio flexibility in asset allocation
  • Diversification for the overall portfolio to mitigate loss of capital at times of market stress

For many years, traditional bond portfolios delivered all of these objectives as falling yields generated both income and total return, while still providing the liquidity and diversification investors sought. It will be much more difficult for traditional bond portfolios to fulfill these roles going forward. Yields have fallen so much — in many cases, into negative territory — that income no longer meets most investors’ requirements, while forward returns are likely to be much lower, and potentially even negative. Meanwhile, central bank asset purchases have contributed to a decline in both secondary-market liquidity and the diversification potential of fixed income.

In this challenging environment, we offer outcome-oriented ideas — many of them with the flexibility to adapt to evolving market conditions — to help your bond portfolio continue delivering the benefits that fixed income has traditionally provided. These approaches can be used separately or in combination to meet your specific objectives, even when interest rates are rising or the credit cycle is deteriorating. To discuss further, please contact your Wellington Management representative.

 
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The renewed case for absolute return fixed income: From challenges to...

Authors: Chris Perret, CFA, ...

Absolute return fixed income strategies, designed to be opportunistic and capable of performing in both up and down markets, gained the attention and support of investors after the global financial crisis....

File under: Preparing for reflation and rising rates, Fixed income strategies for today — and tomorrow, Desire for upside, fear of downside: Can alternatives help?

 
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Opportunistic Inflation Sensitive Bond: A new approach to hedging inflation...

Authors: Brij Khurana, ...

The authors outline a strategy that aims to hedge inflation risk more effectively and deliver higher total returns than traditional inflation-linked bonds (ILBs) in inflationary regimes, with similar...

File under: Fixed income strategies for today — and tomorrow

 
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Bank loans: Yesterday, today, and tomorrow

Authors: Jeff Heuer, CFA, ...

Bank loans offer a rare combination of relatively high income, low interest-rate sensitivity, diversification, and currently attractive valuations.

File under: Preparing for reflation and rising rates, The search for income and return, Fixed income strategies for today — and tomorrow

 
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Nov 2016
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Overcoming negative yields: How currency hedging can turn a negative into a...

Authors: Sunil Kapadia, ...

Negative bond yields don’t necessarily have to result in negative returns. The issues of negative yielding bonds and currency risk are intimately linked, and we describe how bond investors referenced to...

File under: Fixed income strategies for today — and tomorrow