Solving the Core Fixed Income Conundrum (2024)

FAQs

What is the core fixed income strategy? ›

The Core Fixed Income strategy employs a multi-sector total return approach, investing exclusively in investment grade securities.

The core plus return profile is typically an 8%-12% annualized return with a similar level of cash flow as a core portfolio, 6% up to 8%. The rest of it is additional growth in the value of the portfolio's assets. Due to the higher risk compared to core, core plus investors have a higher expectation for returns.

Fixed income is a type of investment security that pays a return to investors on a fixed schedule. At maturity, investors are repaid the principal amount they invested.

The factors that affect the bond markets and interest rates are very complex. Economics, monetary and fiscal policy, business conditions, international trade, currency movements, and capital flows all affect market interest rates.

As the name suggests, a bullet strategy involves purchasing bonds with a specific maturity target. For instance, an investor might focus exclusively on one-year bonds, or only invest in twenty-year maturities.

Fixed-income investing is generally a conservative strategy where returns are generated from low-risk securities that pay predictable interest.

In short, to derive core earnings, non-core expenses that have been deducted as expenses in the income statement will be added back, and non-core earnings that have been recognised as income in the income statement will be deducted.

Examples include one-time gains from the sale of assets, gains in pension assets, unrealized gains from hedging activities, and proceeds from litigation or insurance settlements. S&P Core Earnings are often viewed as a more conservative measure of profitability than reported net income.

Core holdings are the central investments of a long-term portfolio so it's essential that they have a history of reliable service and consistent returns. An exchange-traded fund (ETF) that tracks an index fund or a group of blue-chip stocks are examples of core holdings.

The “4 Cs” of credit—capacity, collateral, covenants, and character—provide a useful framework for evaluating credit risk. Credit analysis focuses on an issuer's ability to generate cash flow.

What is the best fixed income investment? ›

US Treasury notes and bonds are considered the safest fixed-income investments because they are backed by the full faith and credit of the US government, which has never defaulted on its obligations.

Look for rate-sensitive fixed income

While interest rate sensitivity may have pinched fixed income investors in 2021 and 2022 as inflation soared, fixed income is poised to earn healthy total returns this year. In general, prices rise as yields fall in fixed income.

The Core Fixed Income Strategy is an investment grade bond portfolio that seeks to preserve capital and prudently improve returns. This strategy invests in U.S. Treasury, government-related, corporate and securitized sectors and offers broad exposure across the yield curve.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

The short answer is bonds tend to be less volatile than stocks and often perform better during recessions than other financial assets.

Core Real Estate Definition

Investment properties that are considered stable and (relatively) low-risk. Hence, among the typical commercial real estate investing strategies, core real estate projects to the lowest risk (variance in outcomes) and lowest potential total return.

Designed to deliver total return over a market cycle from a portfolio of investment grade intermediate and long-term bonds. Invests primarily in a diversified portfolio of U.S. Treasuries, U.S. Agencies, corporates, mortgage-backed securities, and asset-backed securities.

A core investment strategy is by definition low-risk. Core investors tend to take a very long-term approach toward real estate investment, viewing real estate as a bond-substitute with some diversification and inflation hedging characteristics.

The Morgan Stanley Global Fixed Income Opportunities Strategy is a value-oriented fixed income strategy that seeks total return including a high level of current income by investing across the fixed income asset spectrum, inclusive of investment-grade and high-yield credit, convertible bonds, securitized assets ...