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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