Bond markets are complex, dynamic and full of inefficiencies
Bond markets are complex, dynamic and full of inefficiencies
Active managers may be well placed to capture opportunities
Fixed income is often viewed as a stabilizing anchor of a portfolio. Yet in practice, bonds respond quickly to shifting rate regimes, credit cycles and geopolitical events. Treating fixed income as ’hold and forget’ may leave certain opportunities for investors on the table.
Fixed-income markets are fragmented and inefficient, giving active managers scope to add value. Active bond managers can identify and mitigate both interest rate and credit risk in order to add value. - In addition to security selection active bond managers can derive alpha by applying flexibility in duration, yield curve, sector and currency.
- Index replication in the bond market can be costlier and more challenging than in other markets due to transaction costs and liquidity.
- Higher risk sectors such as emerging market debt and high yield can offer idiosyncratic opportunities and an Unconstrained strategy can pursue the most attractive investment opportunities across market cycles.
