Capturing the Opportunity of Constraints

PGIM Fixed Income

September 2019

Gregory Peters, Managing Director, Head of Multi-Sector and Strategy, and Tom McCartan, FIA, CFA, Vice President, Liability-Driven Strategies

Fixed income markets contain a high proportion of investors whose goal of identifying the most attractive relative value is subverted by jurisdictional or self-imposed rules, regulations, and constraints, or is superseded by other non-economic objectives, such as accounting conventions. This, in turn, creates opportunities for total return, multi-sector fixed income investors willing to consider broad investment guidelines and greater degrees of portfolio management freedom. In this paper, PGIM Fixed Income examines:

1. The fixed income market segmentation we observe and the resultant high dispersion in risk-adjusted reward;

2. Principles for identifying relative value and pitfalls to avoid;

3. An outline of our portfolio construction approach for building multi-sector portfolios.




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