Fixed income fund managers and asset allocators have plenty to think about. That much was evident at PGIM Investments’ roundtable held to discuss fixed income investment opportunities amid economic uncertainty. How quickly will economies rebound from the Covid-19 pandemic? How sticky will inflation prove to be? And when can we expect tapering and the first interest-rate hike? All of that was up for debate.
The longer-term outlook for the economy may be anything but certain, with many risks to put in the ‘book of worry.’ However, the mood around the virtual table was one of cautious optimism.
The sharp selloff in financial markets last March led PGIM Fixed Income managing director Greg Peters to coin the term ‘the golden age of credit.’ While valuations have since rebounded strongly, panelists detailed myriad relative value opportunities they are finding in fixed income markets.
The ability to favor loans over bonds or developed over emerging markets, for example, underlines the alpha-adding potential of active managers who have the run of the market and can be nimble in their asset allocations. And with many investors losing money in real terms by holding cash instead of investing in bonds, where attractive yields are available, there is value to be had in talking to clients about their fixed income allocations.
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Investing involves risk, including possible loss of principal. Some investments have more risk than others. Fixed income investments are subject to interest rate risk, and their value will decline as interest rates rise. Past performance does not guarantee future results.
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1052966-00001-00 Ed: 10/21