This is a sponsored article from Allspring Global Investments.
Marketing Communication for professional investors only.
Global bond markets are more attractive than ever, but tight credit spreads make an unconstrained multi-sector approach particularly valuable, says Allspring’s fixed income team.
More income is available from the global public bond markets than ever before. Absolute and real yields are at historical highs, driving global demand, which is expected to remain elevated. This offers investors a wide array of opportunities to source both income and total returns.
However, while the level of yield available is materially higher than at any other time this century, the compensation for bearing credit risk is near its lowest. Global investment grade corporate credit spreads have been wider 91% of the time, and high yield credit spreads have been wider nearly 100% of the time since September 2009.
Global bond markets are more attractive than ever
Source: Bloomberg Finance, L.P. Yield available from global fixed income defined as yield to worst times market value for the for the Bloomberg Multiverse (LF93TRUU Index). 2024 total annualised. As of 30-Sep-24.
Yet bond investors do not have it easy
In the last 15 years
Source: Bloomberg Finance, L.P., ICE Bank of America. Global Aggregate = Bloomberg Global Aggregate Bond (LEGATRUU Index), U.S. Aggregate = Bloomberg U.S. Aggregate (LBUSTRUU Index), Multiverse = Bloomberg Multiverse (LF93TRUU Index), U.S. 10-Year Treasury = Bloomberg U.S. Generic 10 Yr (USGG10YR Index), Global Corporate = ICE BofA Global Corporate (G0BC Index), Global High Yield = ICE BofA Global High Yield Constrained (HW0C Index). As of 30-Sep-24.
Two further factors underline the importance of a diversified fixed income allocation. Firstly, benchmarks are imperfectly designed. Unlike equity indices, which are dominated by companies seen as the most valuable by the market, fixed income benchmarks are dominated by sovereigns and companies with the most outstanding debt.
The duration, composition and credit quality of that debt are a function of issuance. Since the end of 2008, the Bloomberg Global Aggregate Bond Index has experienced material change as the duration of the index increased by nearly 30%, and the proportion of the index rated Baa rose from 26% to 47%.
Secondly, allocating to specific sectors carries risk. Leadership aggressively rotates within global fixed income markets, making it difficult for fixed income investors to pick a particular sector of the market in which to concentrate their portfolio.
Multi-sector fixed income offers the solution
Dynamically allocating capital across global fixed income markets can help generate a more consistent return stream while mitigating volatility. This approach has been tried and tested through Allspring’s Income Plus Strategy, which launched in 2013 and is the basis for the newly launched Allspring Global Income Fund. Over the last five years, the strategy has outperformed the eVestment universe average and the Bloomberg US and Global Aggregate indices with similar volatility.
We believe that exposure to a broad set of sectors is not enough. An approach designed to exploit the broadest set of inefficiencies from the fixed income landscape by making active decisions to allocate across global sectors, geographies and currencies and exploit a wide variety of pricing inefficiencies through a robust and repeatable process is essential to investor success.
Three elements are key to the success of our multi-sector fixed income investment process.
- Six-month investment horizon
We focus our investment horizon on a rolling six-month timeframe. Each day, we consider how factors like rates positioning, credit exposure, geographic concentrations, quality allocations, currency exposures, and individual securities will affect performance and evolve.Rather than try to estimate how these conditions may change over a three- or five-year period, our team stays grounded in what is happening in the markets in real time. Keeping the time horizon shorter gives us higher conviction in our outlook, allows us to take advantage of smaller but more frequent market opportunities, and reduces the risk of dogmatic views and entrenched misallocations.
- Multiple levers
An important aspect of what differentiates our approach to fixed income investing is our deep knowledge and understanding of how each component within the portfolio interacts as we pull multiple ‘levers’ to build a better portfolio.We consider ‘levers’ as any portfolio decision that helps generate alpha or manage risk. These include rates positioning, currency exposures, industry and quality allocations, and security selection. We focus on using the right combination of levers at the right time.
- Unbiased approach
While some asset managers either specialise in a particular area of the fixed income market or maintain structural portfolio tilts that result in more concentrated and static exposures and often more volatile performance, we seek diversified and unbiased sources of alpha to generate compelling returns over the market cycle without reliance on a particular set of market dynamics or exposures.Adhering to our differentiated, repeatable process, our team believes that unconstrained multi-sector fixed income is a strategy that not only better manages risk but also pursues enhanced returns.
Harness the Power of Unconstrained Fixed income investing. Find out more, click the link below or scan the QR code.
Harness the Power of Unconstrained Fixed Income Investing | Allspring Global Investments
Allspring Global Income Fund inception date : 25th October 2024.
Disclosure
This marketing communication is for professional/institutional and qualified clients/investors only (as defined by the local regulation in the respective jurisdiction). Not for retail use.
THIS DOCUMENT AND THE INFORMATION WITHIN DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORISED OR UNLAWFUL TO DO SO.
Investment risks: your capital may be at risk. Past performance is not a guarantee or reliable indicator of future results. Returns may increase or decrease as a result of currency fluctuations. The value, price or income of investments or financial instruments can fall as well as rise. You may not get back the amount originally invested. Allspring Global Investments (Allspring) is the trade name for the asset management companies of Allspring Global Investments Holdings, LLC, a holding company indirectly owned by certain portfolio companies of GTCR LLC and Reverence Capital Partners, L.P. Allspring includes but is not limited to Allspring Global Investments, LLC; Allspring Global Investments (UK) Ltd.; Allspring Global Investments (Singapore) Pte. Ltd.; Allspring Global Investments (Hong Kong) Ltd.; and Allspring Global Investments (Japan) Ltd. Unless otherwise stated, Allspring is the source of all data; content is provided for informational purposes only. Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and they are subject to change without notice. Any benchmark referenced is for comparative purposes only, unless specifically referenced otherwise in this material and/or in the prospectus under the sub-funds’ Investment Objective and Policy.
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This is a sponsored article from Allspring Global Investments.
