Built for Change: Shifting From Beta to Alpha
A fundamental shift is underway in fixed income. The new era of rising interest rates is causing fixed income managers across the world to rethink how they invest. Investors should consider active managers who focus on generating alpha to help drive returns and create diversification benefits from owning fixed income in a portfolio.1
In the last 10 years, sustained monetary stimulus— lower interest rates aimed at keeping economies afloat after the global financial crisis—made it easy for fixed income managers to earn returns. The systemic effect throughout the market (beta) overwhelmed contributions by idiosyncratic factors (alpha). As yields fell, bond prices across the board rose. Simply being invested in the bond market was enough to earn decent returns.
1. Diversification does not eliminate the risk of loss.
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