Rethinking fixed income investing when the easy money is coming to an end

Friday 11 May 2018

Research / Market

Core fixed income allocation, usually comprising high-quality government and corporate bonds, has played a relevant role in diversified portfolios over the last few decades. In a 30-year bull market for bonds, this allocation has been a stable source of performance; it has, for a long time, provided interesting income and helped to limit the overall portfolio drawdowns. Investors now stand at a crossroads: changes in central banks’ monetary stances are resulting in the end of the easy money era driven by excess market liquidity. This change will provide, in our view, a fertile ground for active bond investors able to dynamically exploit opportunities in multiple fixed income sectors while it could challenge more traditional and static fixed income allocation approaches.

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