Generating Income

Bond yields have risen dramatically since the beginning of 2022. That might look like great news for income investors but the return of high inflation and the potential impacts of recession make life more challenging.

Today, investors need to achieve a level of income that’s high enough to help offset elevated inflation and secure enough to withstand ongoing uncertainties. In this environment, we believe risk-aware outcome-oriented investing strategies can come into their own.

The Opportunity

For fixed-income investors, we believe risk controls and dynamic management will be highly important in the new era. Global multi-sector approaches to investing are also well suited to a quickly evolving landscape, as investors can closely monitor conditions and valuations and prepare to shift the portfolio mix as conditions warrant. 

High-yield bonds are now offering attractive yields—and feature relatively low exposure to interest-rate risk—but they are also generally the most exposed to setbacks in the economy and in equity markets. To further reduce risk, we think it’s worth considering portfolios that focus on high-yield bonds with a short time to maturity. 

There’s a strong case for adopting a balanced approach. Among the most effective active fixed-income strategies are those that pair government bonds and other interest-rate-sensitive assets with high-yielding growth-oriented credit assets in a single, dynamically managed portfolio. 

For investors looking for risk-controlled portfolios with longer-term capital growth opportunities, multi-asset income solutions that can access equity and alternative investments are also worth a look.