Absolute Return Fixed Income: Where does it fit in?

We define absolute return as a style of investing focused on alpha strategies with returns coming from beta largely excluded. While beta is usually positive, it may not always be.

Absolute return fixed income can be used to deliver fixed income returns uncorrelated with market direction. It is a diversifier, narrowly to a fixed income allocation, and more broadly to a whole portfolio. It is also a source of discrete alpha, allowing ready identification of alpha, and access to less traditional portfolio construction methodologies.

Absolute return has a variety of applications for investors. The first and arguably most obvious is that freeing a portfolio return from an underlying beta is particularly relevant if the investor is concerned that the market beta will be anemic, or negative.

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