Fixed income has never been the exciting asset class, but its defensive characteristics have made it the Dennis Rodman (two-time National Basketball Association defensive player of the year) of portfolios, compared to equities that build the basis of your offense, like Michael Jordan and Scottie Pippen.
Some days your scorers will struggle and it helps to rely on your defensive pieces to keep you in the game, like Rodman often did for the Chicago Bulls.
Which brings us to March, the toughest sell-off since the late 1980s (before Rodman had even won his first defensive player of the year award) – this was the time for fixed income to show its defensive sturdiness, and it did, but coming out from the rebound was a different ball game.
But as portfolio managers try to reconfigure their starting line-up, they have had to weigh up the risk of more market volatility and either go for more defensive protection with fixed income or take more chances and aim to score more points with equities.
Either way, it’s no easy slam dunk.
Gopi Karunakaren, Ardea portfolio manager, said, to put it bluntly, the argument for conventional fixed income right now was pretty weak.
“If you think about the way conventional fixed income works and the role it’s supposed to play in a broader multi-asset portfolio, the very low-rate/low-yield environment we’re currently in makes it very challenging for conventional fixed income investments to...