For a number of years we have regarded Absolute Return Fixed Income (ARFI) strategies as a useful diversifier in an investor’s portfolio, offering exposure to fixed income sources of alpha while greatly reducing the inherent interest rate, country, sector or credit spread risk in long-only bond strategies.
In the past few years markets have exhibited spikes in volatility related to a number of factors, including oil price volatility, fears over Chinese economic growth, and central bank policy. In light of this we think it is a useful time to step back and revisit manager performance in this universe.
In this short paper, we provide a recap on what constitutes an ARFI strategy, provide an update on performance and review the extent to which these strategies continue to make sense in the current environment. We also provide an update on client activity and research coverage.
Joe Abrams and Marc Marsillo, discuss Absolute Return Fixed Income strategies, how they have performed and what they can be used for.