For qualified investors

An unconstrained and flexible approach to global fixed income

An unconstrained and flexible approach to global fixed income, built to adapt to today’s challenging markets.

Choose your risks carefully

The right investment mix in today’s financial markets will likely not be found with ease. Low all-in yields that are offered on today’s high quality bonds often mean that investors have less of a cushion from higher rates than they realise. A small rise in yields can often wipe out the entire annual income of a bond.

While an allocation to fixed income remains an important part of a well-diversified investment portfolio, the low and likely rising global yield levels suggest that a new approach is needed.

Focus on tomorrow, not yesterday

Global reflation continues. The combination of positive economic data, rising inflation rates, and tighter monetary policy means reflationary trends have further to go. Absent a negative political or external shock, this means US treasuries and high quality sovereign bonds globally will move higher in yield, as better growth allows for withdrawal of easy monetary policy. EM growth prospects should also improve in this environment.

Where can opportunities be found in this environment?

While sovereign bond yields are low in most developed markets, or for some countries even negative, the fixed income universe is very broad, diverse and deep. We believe that there are still many opportunities to be found in what is one of the largest asset classes in the world, dwarfed only by foreign exchange.

Therefore, Investors who are able to allocate to the global bond space, including emerging markets, corporate bonds and asset backed securities, as well as utilise strategies such as relative value and actively manage duration and risk, can still achieve attractive risk-adjusted returns.

So what should investors do with their money?

Investors could decrease the interest rate sensitivity and possibly increase the running yield of a portfolio, without having to compromise on its overall risk-profile, by considering global flexible strategies.

Flexible strategies, with a diversified investment approach, can take advantage of attractive opportunities without overly relying on any one market, trade or position – for example with the flexibility to invest across regions, sectors, sub-sectors and currencies. The ability to utilise relative value and absolute return type strategies within a portfolio can also help to reduce beta risk and focus on idiosyncratic opportunities and market dislocations. The significant diversification achieved across all these markets and strategies often means that, compared to traditional investments, flexible products can achieve a higher yield and lower interest rate sensitivity while maintaining a similar level of portfolio risk.

We see unconstrained global strategies, such as FIGO, as important building blocks to help your clients make the most of today’s market environment.

Risk Pie Charts

*Yield to worst, calculated based on all possible call dates, reflecting lowest potential yield that can be received without the issuer actually defaulting.
#The above pie charts show the distribution of stand alone risk within the Barclays Global Aggregate and BGF FIGO. Ex-ante value-at-risk (1 year, 1 standard deviation) based on the BRS portfolio risk model average contribution to risk.

All data as of  31 March 2017. Source BlackRock