Creative Solutions for Evolving Markets

In recent portfolio consultations, our Portfolio Construction and Strategy Team has heard many clients ask for our perspective on reducing fixed income duration through the use of alternatives or short duration strategies. The concern is that rising interest rates in the U.S. could derail objectives for their portfolio. However, as our portfolio consultations tend to unpack these interest rate fears, we find that what is initially broad pessimism can be organized into a few specific concerns, and, importantly, specific portfolio solutions.

Even in an environment defined by low interest rates and tight credit spreads, there are ample risk-adjusted opportunities across government, credit and alternatives markets – many of which are not typically considered “short duration” solutions, but nonetheless deliver important ways for fixed income investors to successfully navigate the risk of rising rates.

In this article, we aim to distill our recent client portfolio consultations into three typical client “personas” we encounter and how, throughout each, we find opportunities to redefine what they view as their ideal “short duration” solution.