Portfolio strategy – Fixed income

Last year ushered in a new era for global fixed income and credit markets. It was the worst, in terms of returns, for bond investors in years, but it signalled a regime change. Investors need to be prepared for structurally higher inflation and rates, as well as higher volatility. But for fixed income managers, this is an environment where value is easier to find. Our report looks at this new beginning for fixed income investors, and at how selectivity has become key in the high yield and loan markets.

In Europe, investment grade credit has made a comeback, with yields higher than equity dividends for the first time in a decade, although the risks linked to inflation remain substantial. Convertible bonds are also returning to favour as issuance by corporates has returned to historical volumes.