Key takeaways:
- The fixed income universe is incredibly vast in breadth and depth, with different sectors offering distinct combinations of rate sensitivity, credit risk, yield, volatility, and equity correlation.
- Benchmark indices such as the Bloomberg U.S. Aggregate Index are heavily concentrated in Treasuries, agency MBS, and investment-grade corporates, leaving many attractive sectors such as collateralized loan obligations (CLOs), high yield, emerging markets debt, asset backed securities (ABS), and commercial mortgage-backed securities (CMBS) underrepresented or excluded.
- By actively blending government, securitized, corporate, and international fixed income sectors within a strategic asset allocation framework, we believe portfolios can be more diversified and efficient, and better aligned with investor objectives.
As investors seek to optimize their allocation to fixed income, we think it’s important to have a solid understanding of the depth and breadth of the investment opportunity set. To illustrate this, we split the fixed income universe into four main categories: Government, securitized, corporate, and international. We then break down each category into key sectors to allow for side-by-side comparisons of notable metrics.
To read the full paper, download the PDF.
