Are investors being compensated for fixed income risk?
15 October 2018 | Portfolio construction
As a result of accommodative central bank policy, including historically low interest rates and quantitative easing, yields across fixed income have fallen since the global financial crisis (GFC). This has led investors to 'reach for yield' and take on more credit risk, as they move out of higher-quality investment grade asset classes and into lower-quality high yield investments. In addition, investors have also turned to 'flexible' fixed income funds as they look to navigate the uncertain interest rate and volatility environment.
In this short paper, we consider if investors that have reached for yield, or sought active flexible/unconstrained interest rate strategies, should consider re-evaluating the role fixed income plays within their wider portfolios.