Not just about duration: the benefits of a multi-factor approach to fixed income
Duration is a key consideration for bond investors; but it’s far from the whole story, argues James McAlevey, Aviva Investors’ Portfolio Manager, AIMS Fixed Income and Target Return funds.
All too often, we hear that fixed income investing is ‘all about duration’. Duration – the sensitivity of an asset’s price to movements in interest rates – is certainly an important consideration for anyone investing in the bond markets. But it’s far from being the whole story.
This is a crucial concept for fixed-income investors – especially at a time when duration risks are heightened. In recent years, investors’ appetite for long-dated bonds has driven the overall duration, and subsequent supply, of the bond market to record levels. So, now that the US Federal Reserve has embarked on a rate-hiking cycle and other central banks are retreating from the extraordinary monetary stimulus of the past decade, it’s easy to focus exclusively on the risks posed by rising interest rates. But the bond market is a vast and varied place. It has a multi-factor opportunity set, not just those that hinge on the direction of central-bank policy and thus interest rates.
AUTHOR
Partner Article
Our partner businesses are invited to pen articles that offer unique insight from within the industry for the benefit of our readers. If you read something you would like to learn more about you can contact our partners direct or we are happy to put you in touch.
Recommended for you
Everyone has their own reason for wanting to stay healthier, for longer.As a super fund, you're in a unique position to ...
The evolution of financial technology continues accelerating with the emergence of high-speed blockchain networks that e...
Australian property prices are rising again, presenting a compelling opportunity for investors. For the first time in fo...
For the first time in four years, every Australian capital city recorded simultaneous quarterly price growth—fuelle...
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
225.31 3 y p.a(%)
2
Loftus Peak Global Disruption Fund Hedged
120.73 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
72.47 3 y p.a(%)
4
Paradice Australian Mid Cap A
69.09 3 y p.a(%)
5
Global X Ultra Long Nasdaq 100 Complex ETF
61.94 3 y p.a(%)
