Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Author: Vasiliki Pachatouridi, Head of iShares Fixed Income Product Strategy EMEA
Fixed income investors are facing new market realties, as the global economy is moving away from a period of steady growth, stable inflation and supportive central banks. Instead, we are braving a new regime of heightened macro volatility, sticky inflation and tighter monetary policies marking the end of an era of extensive monetary easing. Furthermore, we are seeing an increased adoption of sustainable fixed income strategies1 as investors are increasingly looking to incorporate sustainable preferences into their portfolios.
What is clear is that the role of fixed income needs to evolve. Investors should incorporate new implementation approaches to address the new market challenges and make their fixed income allocations work harder in their portfolios.
Portfolio construction
The current investment landscape is presenting new opportunities for fixed income investors, what will be the role of bond ETFs in multi asset portfolios?
Over the last decade, investors have put their portfolio at risk by over allocating to equities and migrated to lower-quality debt in search of yield. But with central banks raising interest rates recently, we have seen a rapid change in fixed income yields – particularly in high quality bonds, such as government bonds, short duration and Investment Grade (IG) credit.
Product selection:
How can I get more granular in my fixed income allocation without sacrificing liquidity or diversification?
In uncertain times, investors face increasing pressure to deliver returns and maintain diversification while ensuring liquidity. They need to employ different tools (including ETFs and index funds) and implementation ideas to those traditionally used and take a more granular approach by focusing on different markets, new countries and credit quality views, as well as specific duration exposures.
iShares’ approach: Using iShares fixed income indexing as efficient building blocks to implement a more granular approach allowing investors to maintain diversification and liquidity in their portfolio.
Exploring sustainability:
How could I shift my fixed income allocation to consider sustainable preferences and measure the impact on my investment objectives?
BlackRock’s approach to sustainability is rooted in our fiduciary duty to clients. We provide choice to our clients, we seek the best risk-adjusted returns, and we underpin our work with research, data, and analytics. As a fiduciary, we seek to manage material risks and capture opportunities that could impact our clients’ portfolios, including those related to sustainability.
iShares’ approach: If investors plan to rethink their fixed income allocations by including sustainable considerations, they need a partner. Backed by BlackRock, iShares fixed income indexing, can help investors navigate this change.
To learn more about fixed income ETFs, search “iShares fixed income” or click here
1Source: Global Business Intelligence as of 31 December 2022. Sustainable fixed income ETFs have grown almost 9 times higher since 2015 (from $7.8 billion to $70.4 billion)
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Capital at risk. When interest rates rise, there is usually a decline in the market value of bonds, and the issuer of the bond may not be able to repay and make interest payments. The value of investments and the income from them are not guaranteed.
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