Bond yields are higher than they've been in nearly 16 years,
presenting investors with
a variety of appealing opportunities regarding fixed income.
Most notably,
bonds can serve as
a valuable hedge to equities and other risk assets,
especially as they now offer compelling
income in real terms,
providing substantial diversification benefits.
With this favorable
macroeconomic backdrop in mind,
Stansberry Asset Management created Bond Plus,
an actively managed
fixed income strategy built to take advantage of
persistent inefficiencies in the corporate credit
market.
Over the past several years,
many investors have moved to passive core fixed income strategies,
believing these markets are too efficient
for active managers to generate alpha.
Yet passive approaches
have frequently underperformed active core fixed
income strategies and may expose investors to
several forms of unintended risk.
We believe our actively managed Bond Plus strategy not only offers
the potential for enhanced returns,
but can also add value by aligning investors'
objectives with features
in several key areas where passive index tracking approaches
typically fall short.
For example,
the
foundation for the Bond Plus strategy begins with
our simple belief that due to a variety of reasons,
the corporate credit market is inherently inefficient.
As a result, we rely heavily on our own internal
analysis to identify whether security is mispriced or misrated.
This can provide us with opportunities to
anticipate credit rating upgrades or downgrades
which can materially impact performance.
We also believe
that there is considerable value to be harnessed from
the unrated portion of the fixed income universe.
The
simple reality is that because most bonds have ratings,
the ones that don't are often incorrectly
considered riskier by investors.
But investing in unrated debt requires deep
fundamental research,
which results in
passive strategies avoiding this
lucrative portion of the bond market.
And one of the most compelling opportunities
within the unrated fixed income universe
can be found amongst convertible instruments,
which combine
characteristics of both equity and fixed income securities,
providing investors with unique
total return
opportunities.
The U.S.
convertibles market has long been overlooked
by asset allocators and investment
managers
primarily due to its lack of credit
ratings and overall inherent complexity.
Many investors
simply lack the
expertise required to analyze them.
This complexity is exactly what creates
the opportunity for us as we have the
experience and knowledge necessary
to identify attractive convertible securities
as a core feature in our bond plus strategy.
The end result of our efforts is a low volatility strategy
consisting of high credit quality investments with the potential to
generate stable income and meaningful returns for our clients.
If you're looking for a diligent,
actively managed strategy with such a profile,
then perhaps bond plus deserves an allocation
in your overall portfolio approach.
