With a diversified core plus strategy, participants don’t need to worry about managing multiple sectors themselves.
When evaluating core plus strategies, it’s important to consider the approach and philosophy behind each option. The way managers approach sector allocations can vary significantly.
Stock funds typically dominate core investment menus – versus standalone bonds funds – and may disproportionately affect older participants who tend to be more focused on investment risk and have more conservative allocations.
In today's evolving investment landscape, plan sponsors must reassess the fixed income options available in their defined contribution (DC) plans, particularly as more participants approach retirement and seek to enhance their income and diversification. Traditionally, many DC plans have relied heavily on core bond strategies tied to the Bloomberg US Aggregate Bond Index.1 However, a well-constructed active core plus strategy can help provide participants with a broader set of fixed income sectors beyond traditional core bonds.
| Core | Plus |
|
|
Plus sectors make up nearly half of the U.S.fixed income universe US fixed income $54.5 trillion |
|
Core $29.5 trillion |
Plus $25.0 trillion |
Sources: SIFMA and Bloomberg L.P., as of 12/31/23
Fixed income investments are an essential component for generating income and serving as a counterweight to equities, particularly during periods of market volatility. For participants, a core plus strategy can help simplify their fixed income allocation by offering a comprehensive solution that covers multiple sectors without requiring them to manage complex portfolios.
When evaluating core plus strategies, it’s important to consider the approach and philosophy behind each option. The way managers approach sector allocations can vary significantly. Some strategies may take large, concentrated bets on specific sectors, potentially leading to unintended risks for participants.
Explore how an active core plus strategy can help enhance your DC plan.
The Bloomberg US Aggregate Bond Index, an unmanaged index considered representative of the US investment-grade, fixed-rate bond market.
Invesco’s stable value investment process is focused on managing risk and providing an extremely stable investment experience for participants across a full range of market climates.
Recent market volatility has refocused attention on large-cap value strategies to help broaden diversification and strengthen potential return outcomes for participants.
Artificial Intelligence (AI) is transforming entire industries and creating opportunities for investors
Important information
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About Risk
Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable tomeet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating. The values ofjunk bonds fluctuate more than those of high-quality bonds and can decline significantly over short time periods.
Diversification does not guarantee a profit or eliminate the risk of loss.
The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. This article is for informational purposes only and is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision.
This article is for informational purposes only and is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision.
As with any comparisons, investors should be aware of the material differences between products. Differences include, but are not limited to, objectives, cost and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal return, tax features and management style. Investors should talk with their financial professional regarding their situation before investing.
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