Higher inflation, rising interest rates and greater uncertainty have made investing more challenging. For bond investors, simply owning bonds may no longer be enough to successfully diversify risk.
How bonds are selected and managed can influence how exposed a portfolio is during a market downturn. An experienced, active management approach can help turn volatility into an opportunity for growth.
Looking beyond the market index
Bond indices are usually weighted according to the amount of debt issued. As a result, the biggest borrowers often make up the largest share of the index but are not necessarily the highest-quality issuers. Unconstrained active strategies are not required to follow these index weights, allowing managers to select investments they believe offer the best balance between risk and reward.
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