Guest Author: Stephen Campisi, CFA, The Pensar Group

A growing consensus for lower expected returns in equity is causing investors to turn to fixed income as an increasingly-attractive source of risk-adjusted returns. One survey of investment firms estimates large cap equity returns at only 6.4% with corporate bonds earning 4.8% with lower volatility risk. Investors are realizing that managing total portfolio volatility risk requires a more substantial exposure to bonds; this is especially true for managing sudden and severe short-term equity market downturns. 

The trend of higher allocations to illiquid alternatives increases the risk of funding the client’s required payouts from the equity portfolio, and bonds are emerging as an ideal means of helping to provide funding certainty amidst uncertain equity markets. And while equity alpha remains elusive for many managers, substantial research is emerging that supports the greater likelihood of finding more reliable alpha in bonds, given the exploitable factors that drive bond performance. 

Despite these advantages, bonds continue to be poorly understood and underutilized, especially among risk managers and performance analysts. Our session on maximizing the value of the fixed income investments within the asset owner portfolio dispels the misunderstandings regarding how bonds are issued, traded and allocated in multi-asset portfolios. This includes examples of key market events where bonds drove portfolio success, as well as guidance in how to seek bond alpha. Moving from strategic to tactical positioning, we conclude with a true decision-based approach to fixed income performance attribution, eliminating the key misperceptions and unnecessary complexities found in some bond models.

Join Stephen at PMAR North America on May 21-22 in New Brunswick, NJ, as he presents “Managing Expectations While Measuring the Value of Your Decisions.” In this session, he’ll explore how to effectively use fixed income performance attribution to assess the impact of investment decisions while managing expectations. Key takeaways include focusing on actual decisions, maintaining a structural, decision-based approach, and keeping the model clear and simple for better insights. Don’t miss this opportunity to deepen your understanding of fixed income attribution!

Click on this link to learn more.