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Multi-Sector Fixed Income: Back in Focus

June 2021


Multi-Sector Fixed Income: Back in Focus

As the global economy returns to growth and inflation accelerates, few investors can afford to be complacent about their fixed income exposures. Many investors, in seeking to mitigate current and future risks, are turning to multi-sector fixed income strategies for their potential yield enhancement and diversification benefits.


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IN THIS PAPER

Multi-Sector Fixed Income

Assessing multi-sector funds: The attractions of multi-sector fixed income strategies have become more compelling over the past few years as credit spreads across most fixed income markets have tightened. Making use of these strategies may allow investors to access unique investment sectors that they might having difficulty allocating to on a standalone basis.


Categorising complex strategies: Performing peer-group analysis can be difficult when considering multi-sector fixed income strategies because they are complex, so we’ve provided a new taxonomy that can help investors differentiate these strategies by asset type, expected return, volatility and liquidity.


Understanding implementation challenges: Investors looking to implement multi-sector fixed income solutions alongside their legacy portfolios need to be prepared to cast a wide net when initiating manager searches; this paper explores key considerations and recommends strategies for monitoring performance of these ‘benchmark agnostic’ funds.



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Multi-Sector Fixed Income

Asset owners are preparing for a future era of probable interest rate hikes by exploring the feasibility of diversifying their fixed income allocations. Some investors are now exploring the universe of actively managed multi-sector fixed income strategies, which eschew single-strategy, benchmark-relative approaches in an effort to capture returns opportunistically while providing downside protection. This paper offers up our own categorisation of these products in order to guide investors with peer group analysis; we also suggest means of assessing managers’ performance and propose several key considerations for investors looking to implement multi-sector fixed income solutions alongside their legacy portfolio allocations.




 

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This commentary is for institutional investors classified as Professional Clients as per FCA handbook rules COBS 3.5R. It does not constitute investment research, a financial promotion or a recommendation of any instrument, strategy or provider. The accuracy of information obtained from third parties has not been independently verified. Opinions not guarantees: the findings and opinions expressed herein are the intellectual property of bfinance and are subject to change; they are not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. The value of investments can go down as well as up.

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