Unsure about inflation and interest rates, some advisors are allocating capital to active managers in the alternative credit space
As central banks embark on what’s perceived as an interest-rate cutting cycle, bond values should be experiencing a significant lift, powering client portfolios.
Today, the curve is flat – neither a good nor bad sign, Mr. Dhanani says, although it illustrates investor uncertainty. Still, about 20 per cent of her clients’ fixed income allocation is held in guaranteed investment certificates or high-interest savings to cover expenses for the next two to three years. Another 30 per cent of fixed income is invested in low-fee index exchange-traded funds while the remaining 50 per cent is allocated to alternative funds, such as CI Alternative Diversified Opportunities Fund, she says.
Many investors may not “feel all that excited about that yield” given the perceived risks, says Kevin Foley, managing director of institutional accounts at YTM Capital Asset Management Ltd. in Toronto. “The market appears to be saying bond yields don’t deserve to be any lower,” he says. “If that’s the case, traditional bond funds will have a hard time performing.”
The current uncertainty, however, doesn’t make the task of explaining bond strategies easy. Even among experts, a diversity of views exists, Mr. Dhanani says.
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