Seeking alpha in fixed income

Jul 12, 2018

Today, investors increasingly have access to a wide range of investment options. Index investment products seek to provide effective, and inexpensive, exposure to the performance of broad market indices. While these products are useful and may provide substantial benefits to investors, flexible, alpha-seeking investment approaches remain an important tool in fixed income.

Furthermore, alpha-seeking approaches can help navigate structural changes in benchmark risk. Flexibility is particularly important in today’s environment, where interest rate risk is higher than it has been historically, and debt issuance is likely to impact the composition of broad market indices in a significant way going forward. To help illustrate these points, in the following sections we discuss the primary drivers of fixed income returns, the potential opportunities that arise from changes to benchmark indices, and the benefits of a robust macro investment process. We will begin by reviewing the unique risk factors that drive performance in fixed-income portfolios, since understanding these primary risk factors will help frame the discussion around why alpha-seeking strategies are so important.

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Bob Miller
Managing Director, Head of Multi-Sector & Rates Fixed Income