Markets are still facing uncertainties regarding the impact of the Federal Reserve’s aggressive rate hikes and quantitative tightening, a potential economic slowdown, and the likelihood of other unforeseen consequences of financial disintermediation. However, it remains one of the most attractive times in the post-Global Financial Crisis era to be invested in U.S. fixed income, particularly relative to other more volatile asset classes. Markets like these represent opportunity for active fixed-income asset managers. With high yields available on relatively low risk assets within credit, it is a good time to be defensive and maintain elevated levels of liquidity. This posture is designed to help protect our portfolios against late-cycle uncertainty, and position us to be rewarded as a provider of capital down the road.
Important Notices and Disclosures
One basis point is equal to 0.01 percent.
Investments in fixed-income instruments are subject to the possibility that interest rates could rise, causing their values to decline. High yield and unrated debt securities are at a greater risk of default than investment grade bonds and may be less liquid, which may increase volatility. Investors in asset-backed securities, including collateralized loan obligations (“CLOs”), generally receive payments that are part interest and part return of principal. These payments may vary based on the rate loans are repaid. Some asset-backed securities may have structures that make their reaction to interest rates and other factors difficult to predict, making their prices volatile and they are subject to liquidity and valuation risk. CLOs bear similar risks to investing in loans directly, such as credit, interest rate, counterparty, prepayment, liquidity, and valuation risks. Loans are often below investment grade, may be unrated, and typically offer a fixed or floating interest rate.
This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
