- Fixed Income Portfolio Manager
Skip to main content
- Funds
- Insights
- Capabilities
- About Us
- My Account
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
In recent months, significant investor concerns have arisen around persistently high inflation, the specter of rising US interest rates, and the potential for economic and/or market disruptions from these risks. Geopolitical escalations in Russia and Ukraine have added yet another layer of complexity to financial markets and the macroeconomic environment. We’d like to highlight four key themes that we believe may support the securitized credit asset class against this challenging backdrop:
By way of historical context, we looked at recent US Federal Reserve (Fed) rate-hiking cycles to see how securitized credit assets have performed relative to other major fixed income sectors during rising-rate periods. In the absence of an all-inclusive market index to use as a proxy for the securitized space, we instead focused on various subsectors that we consider to be representative. As shown in Figure 1, the securitized subsectors generally performed well in rising-rate environments, producing positive total returns.
While credit spread levels have compressed meaningfully from those reached at the onset of the pandemic, we believe the securitized asset class continues to offer an attractive risk/return profile compared to many other fixed income spread sectors. Indeed, many securitized subsectors may benefit from rising inflation and interest rates in the coming months.
While the current market sell-off (driven by the Russian invasion of Ukraine) makes the entry point to the securitized asset class more attractive, we remain confident in its fundamentals. And from a longer-term strategic standpoint, we believe the asset class can play a structural, diversifying role in many investor portfolios.
Capitalizing on rate shifts: Parsing opportunities in the second half
Continue readingJune FOMC meeting: May disinflation is welcome, but is not enough for a rate cut
Continue readingGovernments have been slow to reduce their fiscal deficits — it could cost them
Continue readingURL References
Related Insights
Stay up to date with the latest market insights and our point of view.
Weekly Market Update
What do you need to know about the markets this week? Tune in to Paul Skinner's weekly market update for the lowdown on where the markets are and what investors should keep their eye on this week.
“Goldilocks” and the three drivers of hedge fund outperformance
Members of our Investment Strategy & Solutions Group explain why shifting economic conditions may bode well for hedge funds broadly but also see reasons that manager selection may be more important than ever.
Time for bond investors to take the wheel?
Volatility makes bond investing less straightforward, but it can also create opportunities, provided investors are in a position to "take the wheel" in order to capitalise on them.
Setting ROAs for 2025: A guide for US corporate and public plans
How are pension plans adjusting their ROA assumptions? And how do those assumptions line up with our long-term capital market assumptions? Find out in this annual update.
What do declining European earnings mean for ECB policy?
European companies have been unexpectedly resilient over the last couple of years. However, the outlook for European earnings could be more challenging than headline numbers suggest. What could this mean for investors?
Corporate pension trends and topics: What’s top of mind for 2024?
Members of our LDI Team address a range of topics that US corporate plans will be thinking about in the coming year, from pension funding and accounting issues to portfolio diversification opportunities.
Rebalancing a multi-asset portfolio: A guide to the choices and trade-offs
Many investors wrestle with portfolio rebalancing decisions, particularly in volatile environments. In this paper, members of our Investment Strategy Team argue for a well-structured rebalancing policy and share research on different approaches and common implementation considerations.
Monthly Market Snapshot — March 2023
A monthly update on equity, fixed income, currency, and commodity markets.
Monthly Market Snapshot — February 2023
A monthly update on equity, fixed income, currency, and commodity markets.
Power move: Why electric utilities may be the key to the energy transition
As the world consumes more electricity from renewable energy sources, the global power grid will need to be modernized. While renewables like wind and solar have attracted much of the attention from investors looking to play the energy transition, electric networks utilities may offer more upside today.
URL References
Related Insights
Chart in Focus: Can this equity bull market last?
Can this current equity bull market last? In this latest edition of Chart in Focus, we focus on the indicators of whether it may come to an end or keep running.
Multiple authors