Capital IdeasTM
Investment insights from Capital Group
Fixed Income
Peter Becker
Flavio Carpenzano
Buy & Maintain (B&M) investing in fixed income is very different from the normal way investors think about constructing their credit/corporate bond portfolios. Its duration and income-driven strategies have tailored duration profiles and steady cash flows designed to match a defined set of cash liabilities over a defined period. This means choosing specific bonds to offer a reliable and transparent series of cash flows rather than managing the bonds relative to indices.
While we acknowledge B&M credit strategies offer advantages to several types of investors (i.e. liability-driven investors, or investors under accounting or solvency constraints), a fully active approach could provide greater potential for returns and risk management.
This paper makes the case for why investors should consider a more active credit approach in the current economic environment.
The below table highlights the key differences between an active approach and a B&M strategy.
Comparing key characteristics of different investment approaches
For illustration purposes only
Source: Capital Group
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Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.