Similarly, one cannot just move down the credit quality spectrum to pick up a little more yield as one could in the old days. While interest rates have declined across all sectors of the bond market, the extra compensation that investors could reap for moving down the credit quality spectrum has declined further. Thus, declining absolute interest rates, combined with declining interest rate spreads, is like adding risk on top of the other risks.
NAVIGATING THE MINEFIELD
We think that this market offers opportunities for actively managing fixed income assets through a process that puts risk first. Our Risk First approach has historically helped us sidestep shocks to the bond market, such as last fall’s interest rate spike. By putting risk first, and seeking relative value opportunities, our strategies have generated a healthy current yield while still helping to preserve capital.
We achieve this by managing interest rate and credit risk, while casting a wide net when seeking opportunities in both the traditional and non-traditional fixed income arenas. Outside of the traditional Bloomberg Barclays Aggregate Bond Index sectors, such as U.S. Treasuries, investment grade corporate bonds, and agency mortgagebacked securities, we are finding a host of return enhancing and risk management opportunities further afield. From broadly diversified ETFs that blend allocations to REITs, MLPs, dividend-paying equities, and corporate bonds, to more focused, outside of the mainstream holdings, like convertible bond ETFs, high yield municipal bond ETFs, ETFs focused on preferred stocks, and high quality floating rate fixed income ETFs.
One key to successful portfolio management, both within the traditional fixed income spectrum and outside of it, is to appropriately balance the potential risks associated with each of these investments. So, how should you navigate the fixed income minefield? Contact Stringer Asset Management for more information: [email protected].
DISCLOSURES
Any forecasts, figures, opinions or investment techniques and strategies explained are Stringer Asset Management LLC’s as of the date of publication. They are considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect to error or omission is accepted. They are subject to change without reference or notification. The views contained herein are not be taken as an advice or a recommendation to buy or sell any investment and the material should not be relied upon as containing sufficient information to support an investment decision. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Past performance and yield may not be a reliable guide to future performance. Current performance may be higher or lower than the performance quoted. The securities identified and described may not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Data is provided by various sources and prepared by Stringer Asset Management LLC and has not been verified or audited by an independent accountant.