Even as central banks begin to cut rates, investors and advisors can still find attractive opportunities in fixed income. But, as Rick Rieder, BlackRock’s Chief Investment Officer explains, it’s about knowing where to look.
Yields are currently very attractive, he says, as central banks are starting to lower rates. As a result, real rates are holding up, particularly in areas like high-yield securitized assets and emerging market infrastructure.
“You’re buying things in fixed income with really good credit quality and at a good price,” he says.
While investing in bond ETFs that track an index has provided investors with an efficient way to access fixed income when central banks were raising rates, there’s a case to be made that actively managed ETF strategies can be an efficient way to position your fixed income portfolio in the current market.
“One of the secrets of fixed income is that you can provide more yield than a broad index,” says Rieder. “More and more people are seeing that fixed income managers can outperform indices.”
Active strategies can have an edge in this market because they tend to be unconstrained, allowing investors and advisors to optimize their fixed income portfolio, explains Rieder.
“If you eliminate the parts of fixed income that don’t have any value add, you can start out ahead,” he says. “But to pick out the best parts, you need a big research team around the world to find the best places to do it.”
BlackRock’s scale, which is backed by sophisticated proprietary risk management systems that account for different scenarios and correlations that could impact the portfolio, allows it to pursue the best opportunities they see around the world.
“That’s hard for an individual to do,” says Rieder.
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