A global multi-sector fixed income strategy can offer a wide range of opportunities beyond the domestic market, said Terry Moore, portfolio specialist, global multi-sector and fixed income solutions strategies, with T. Rowe Price, so it’s something more DC investors need to be aware of.
“There is a world of opportunity out there globally, with very attractive investment characteristics,” he said. “We believe that by permitting an investment manager to source the best ideas from all over the globe, it can add value to the fixed income allocation. For a sophisticated investor—or [for an average plan member] with proper member education—a global fixed income allocation may make sense as either a stand-alone fund option within a plan or possibly within a balanced fund or target-date fund.”
Most DC plans have a core bond option in fixed income, which, according to Moore, is important for all investors. “It’s the ‘anchor-to-windward’ in a diversified portfolio that should perform well in times of market stress,” he explained. Instead of confining themselves to one opportunity set of Canadian bonds, investors should look globally across both developed and emerging markets to find opportunities in government, corporate and securitized bonds, Moore suggested.
“Exposure to broader global fixed income opportunities targeting specific return sources—such as credit, interest rates, currency as well as diversification—may enhance return potential and reduce volatility for Canadian DC plans,” he said. “We believe the ability to thoughtfully invest across geographies and throughout capital structures can produce more diversified and better risk-managed portfolios.”
View more videos from the 2015 DC Plan Summit.
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