Fixed Income Investing in Volatile Markets

Rising market volatility and macro uncertainty can be a good reminder of why investors have looked to core fixed income to anchor their portfolios. The diversification potential of core bonds, as well as their risk-adjusted return potential, can help investors de-risk their equity exposure while potentially providing attractive returns.

On the upcoming webcast, Fixed Income Investing in Volatile Markets, David Braun, Head of U.S. Financial Institutions Portfolio Management at PIMCO, and Don Suskind, Head of ETF Strategy at PIMCO, will provide tips and insights for attractive risk-adjusted returns and stability within a broad investment portfolio.

Bond investors seeking to diversify their bond portfolios and limit interest rate risks may turn to actively managed short-term strategies that could allow for more options to protect capital and manage liquidity while generating income. For instance, fixed-income investor can protect against the potential upcoming rate-induced volatility through short duration actively managed bond funds, such as the PIMCO Low Duration Active ETF (NYSEArca: LDUR) and the PIMCO Enhanced Short Maturity Active ETF (NYSEArca: MINT). The bond ETFs are backed by an active management team to select opportunities in low-duration bonds. The active manager has the flexibility to go beyond traditional government debt and include other debt securities like corporate credit to diversify and limit potential risks.

LDUR has a short 1.06 year duration, so a 1% rise in interest rates would only translate to about a minimal 1.06% decline in the fund’s price, and it shows a 3.39% 30-day SEC yield. The ETF largely includes investment-grade debt, but potential investors should be aware that the active ETF includes a hefty tilt toward investment-grade corporate debt.

Additionally, MINT is meant to be used as an incremental step outside of the money market funds. Investors would use the active ETF for capital preservation or to take a defensive view on the market. MINT shows a 0.31 year duration and a 2.67% 30-day SEC yield. The fund only includes investment-grade debt, but most of it is in investment-grade credit 57.8%, followed by mortgage 19.1% and other short-duration instruments 10.5.

Financial advisors who are interested in learning more about fixed-income investments can register for the Wednesday, December 5 webcast here.