A strong core: How Asset-Backed Securities can improve fixed income strength
Asset-backed securities (ABS) are a valuable, but often overlooked diversifier of fixed income portfolios. The Janus Henderson Portfolio Construction and Strategy (PCS) Team explore how ABS has performed through different market scenarios and the potential benefits of an allocation.
8 minute read
Key takeaways:
- ABS are a very diverse and liquid market, offering real economic exposures, with underlying asset pools consisting of the likes of residential mortgages or car loans. However, they are often overlooked by investors in fixed income allocations.
- Investing in ABS can provide access to high quality income, diversification and resilient returns through different market environments.
- Including ABS in a fixed income portfolio has been shown to enhance returns and reduce risks over time.
ABS offer a relatively higher yield versus other similarly rated corporate bonds along with a relatively low-interest rate duration and shorter average spread duration (reducing the price sensitivity to interest rate and credit spread moves in the market). All of which makes ABS a helpful, yet relatively underutilised, diversifier to corporate bonds in fixed income portfolios. Despite their strong benefits and a global ABS opportunity set of more than US$800 billion1 , ABS are often overlooked as part of a diversified fixed income portfolio.
1 Source: Janus Henderson Investors, as at 31 March 2025, based on EU/UK regs compliant universe.
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8 minute read
Key takeaways:
- ABS are a very diverse and liquid market, offering real economic exposures, with underlying asset pools consisting of the likes of residential mortgages or car loans. However, they are often overlooked by investors in fixed income allocations.
- Investing in ABS can provide access to high quality income, diversification and resilient returns through different market environments.
- Including ABS in a fixed income portfolio has been shown to enhance returns and reduce risks over time.