Investors today find themselves in an unusual quandary. Historically, they have thought of fixed income investments as a relative safe haven to offset more volatile and risky investments in other parts of their portfolios, including equities. The risk of capital loss in bond portfolios was generally viewed as limited. That premise no longer holds. After decades of falling interest rates and the past several years of unprecedented global monetary intervention, investors in conventional bond strategies are becoming increasingly concerned about risk of loss as interest rates potentially renormalize. They are reviewing the role of traditional fixed income and are seeking alternatives that better avoid uncompensated risk. We believe that unconstrained fixed income strategies are a potential answer to these concerns. Unconstrained approaches are able to allocate capital and adjust their risk exposures dynamically, across the fixed income spectrum, with fewer constraints.
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