Today’s uncertain fixed-income market environment is providing opportunities for investors who are prepared to accept more risk in exchange for higher potential returns, global asset manager AllianceBernstein said today.
Three areas that risk-averse investors are broadly avoiding—emerging markets, Europe and interest-rate risk—offer potentially attractive opportunities for investors who have appropriate research and portfolio management skills at their disposal, said Jeremy Cunningham, a London-based Senior Portfolio Manager within AllianceBernstein’s global fixed-income business.
“In our benchmark-agnostic and high income portfolios, we’ve shifted away from corporate bond risk to emerging-market sovereign and currency risk on a very selective and opportunistic basis. Within our high-yield allocations, we’re leaning slightly away from the US market in favour of Europe, where we regard the financials sector as particularly interesting,” said Cunningham.
“As for interest-rate risk—everyone’s worried about duration, or the sensitivity of bond prices to changes in interest rates. This can be seen from the fact that yield curves are steep, reflecting market expectations that interest rates will rise. If, like us, you expect rates to rise gradually, however, we think it’s possible to make money from duration, providing you position yourself appropriately on the curve.”
Cunningham is visiting Australia as AllianceBernstein—which has US$445 billion under management in bonds, equities and alternatives—is diversifying into the local retail market with two fixed-income offerings: the AllianceBernstein Dynamic Global Fixed Income Fund (DGFI) and the AllianceBernstein Global High Income Fund (GHI).
“The funds have different objectives, with DGFI intended for investors who want to improve their overall returns and GHI catering for those who seek higher income distributions, but in both cases investors need to be able to accept a higher degree of risk for the benefit of potentially higher returns,” said Cunningham.
“Our key message for Australian fixed-income investors concerned about current market uncertainty or about their ability to sustain attractive income distributions is that we believe the key to achieving their aims lies in a global, multi-sector investment strategy which combines breadth and variety of opportunity to generate returns with ample liquidity and intense and deep research to help mitigate risk.”