Credit and Fixed Income

Definition: Fixed income is a type of investment in which real return rates or periodic income is received at regular intervals and at reasonably predictable levels.  Credit market refers to the market through which companies and governments issue debt to investors in the forms of bonds, notes and other financial vehicles.

Investment Case:   Fixed-income and credit investments can be used to diversify one's portfolio, as they may pose less risk (volatility) than equities and derivative investments and have been historically non-correlated.

Cost: The cost for lower volatility is historically lower performance compared to stocks.  Bonds and fixed income are subject to credit and interest rate risk.  Unbeknownst to many, their returns in high inflationary environments have matched the draw downs of historical equity markets on a real basis. 

Applied Academics:  Academic research shows that the primary driver of bond returns are credit quality and duration.   We look at global bond allocations in sovereign, corporate and credit serving as a balast to volitility in other areas of the portfolio.  

 

 

Noah Schwartz CFP