Yields are back! Time for fixed income repositioning

Default risk on the high-quality securities we invest in is typically low, with defaults very rare for investment grade issuers. We invest across a broad range of sectors and geographies, which helps ensure good diversification.

We don’t just focus on market timing and security selection. Instead, we also identify the big themes driving economies and use this analysis to help drive our selection, including decarbonization, the impact of geopolitical volatility, and the potential scenario of a transition of global economies from stagflation to stagnation.

No market or region can be viewed in isolation. That’s why we combine top-down macro analysis with bottom-up country research on issues like trade and international relations. We develop our macroeconomic outlook and incorporate robust linkages between developed and emerging market economies to better inform our global perspective.

Given the relative volatility of the asset class, an asymmetric approach to risk management and budgeting can provide investors with an overall smoother investment experience over time. We look to reduce volatility throughout the emerging market cycle and maintain a low-tracking error and high volatility in risk-on periods as well as a high tracking error and low volatility in risk-off periods.