As rates hit their highest levels in a long time, Edward Rosenberg, senior vice president and head of exchange-traded funds for American Century Investments, thinks “there’s probably a better way to get exposure to the stock market. fixed income instead. through the Bloomberg US Aggregate Bond Index.
Speaking to VettaFi EIC Lara Crigger in April at Exchange: An ETF Experience in Miami Beach, Rosenberg said fixed income investors should “benefit from things like shorter durations or higher yields. high which can be really beneficial for a wallet”. , even in a rising rate environment.”
As for what investors should be looking for in fixed income, American Century Investment’s Vice President of ETF Products and Strategy, Sandra Testani, noted that since “fixed income markets exhibit a large variety of different risk and return characteristics,” she believes “active management is key in bond markets, especially in the current environment.”
The reason is, according to Testani, that “bond indices really leave a lot to be desired; they overweight some of the most indebted names.” Meanwhile, an active manager “can focus on ensuring the company has the strength to sustain and sustain its coupon payments.”
It also recognizes the possibility of upgrading, so American Century has some exposure in the double B segment of the market, otherwise known as high yield. But if you identify companies with upgrade potential, you can take advantage of them, which is a real advantage from a price point of view.
Testani added that since American Century believed rates were likely to rise, they positioned their portfolios early in the year “to be a bit short” so that they “can be a bit more protective and a bit more defensive. “, thus keeping some dry powder to take advantage of opportunities as they arise.
According to Rosenberg, what sets American Century’s active management approach apart is that ACI’s portfolio managers “seek outperformance through bond selection.”
“They also constantly watch their duration,” he added. “Either they shorten their duration if they think rates will go up, or they can lengthen a bit if they think they will go down. Or, vice versa, if they think nothing is going to happen, they can stay in the middle.”
For more news, insights and strategy, visit the Core Strategies Channel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.