Beyond The “Single-Lever” Approach

In today’s environment, where interest rate volatility is migrating from the short end of the yield curve to its longer-dated points, short duration bonds could be attractive. More generally, in our view, higher volatility in interest rates relative to credit spreads supports the case for a more active approach to managing duration.

Traditionally, Corporate bond strategies have focused on credit risk, usually with the interest rate risk maintained close to that of the strategy’s corporate bond benchmark index. We believe the current conditions call for an approach that integrates credit and interest rate risks: flexibility should mean not only expanding the universe of credit sectors you invest in, but expanding the set of risks that are actively managed.