Re-thinking diversification | AXA IM UK
How to address downside risks in fixed income
Johann Plé, senior portfolio manager, and Rui Li, portfolio manager
In an environment where the duration accounts for more than 80% of the volatility in a fixed income portfolio, duration today is no longer merely a strategic asset allocation choice. Instead, it has become a tactical lever to manage portfolios’ risk-adjusted return profile.
We believe that to harness duration effectively, you need flexibility. Rate volatility is significant but with flexibility you should be able to seize on opportunities to mitigate drawdown risk in a rising rate environment, as seen in 2022, or when rates rally. In this recent period, it has been important to be able to take advantage of…
