Investment Grade Corporate Bonds

Investment Grade Corporate Bonds: Understanding Manager Performance

Investor appetite for investment grade fixed income grew significantly last year but active managers are coming under scrutiny. This report examines corporate bond manager performance and positioning after a period of mixed results.

Investment Grade Corporate Bonds


Investment grade in favour. Investor demand has swung decisively in favour of investment grade bonds, as investors appear to be repositioning fixed income portfolios in a bid to capitalise on higher yields while reducing credit risk. Half of all fixed income searches by bfinance clients in 2023 targeted investment grade strategies, rocketing from just 13% in 2022.

Assessing manager performance. Active managers in Investment Grade Corporate Bonds have produced robust outperformance over the long term. New data illustrates funds' consistent pro-credit-risk bias, which has underpinned strong relative returns.

Interest rate risk positioning. COVID provided the first opportunity in many years to see managers navigating duration positioning through a serious hiking cycle and duration positioning was a massive source of outperformance through this period, despite managers’ bets being modest in size.

Investment Grade Corporate Bonds


Investor demand has swung decisively in favour of investment grade bonds. Yet active manager performance is now coming under scrutiny. In particular, while investment grade credit managers have historically delivered strong relative returns, the recent picture has been more mixed.

The evolving market conditions of the past few years provide an invaluable opportunity for investors who wish to evaluate existing fixed income manager relationships or potential new commitments. Selectors can consider how managers have navigated changing conditions including the first serious rate hike cycle in many years, the ‘Powell Pivot’ and recessionary concerns.

This report looks to provide practical insight to investors seeking to determine appropriate portfolio positioning for an evolving macroeconomic climate and navigate an exceptionally large manager universe.

Important Notices

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.