An Unconstrained Approach Serves Well in Uncertain Times

Conversation with BlackRock's Fixed Income Portfolio Managers

We met with the portfolio managers of BlackRock Strategic Income Opportunities to have a wide-ranging discussion on their approach and why it’s so well suited to the current market environment.

Rick, perhaps you could please start us off by discussing why you think pursuing an opportunistic and unconstrained fixed income approach is particularly important in today’s market environment, and then afterward we can get into precisely what that approach entails?

Rieder: Sure thing. Well, I think the extraordinary turmoil we’ve seen in the economy and markets over the past few years, and the ability of our unconstrained strategy to both open up additional avenues of return generation during that time, while also protecting client capital on the downside, illustrates well some of its benefits versus an approach that is solely tethered to a traditional benchmark, like the Bloomberg U.S. Agg Index. Let me be more specific: in the past few years, investors have gone from being primarily worried about a growing trade war between the U.S. and China, to a multi-year global pandemic that we’re still struggling through and an extremely contentious U.S. election, which held huge policy implications.

Now, most recently, the Russian war with Ukraine and its shock to energy and commodity markets, at a time when inflation was already running hot, has added greatly to investor concerns. Further, as a result of inflationary pressures, we’ve seen a fairly abrupt about-face in developed market monetary policy that has sent markets into more turmoil. Throughout all these events, the prospects for economic growth, labor markets, inflation and monetary and fiscal policy have gyrated wildly. And it’s in that context that an active and flexible approach to fixed income can be most valuable, in my view, and I’m extremely proud about how our team has navigated these varying crosscurrents.