“Income is back in fixed income” – If there was a contest for the catchphrase of the year 2022, this one would certainly be a hopeful contender as it captures the essence of market evolution. The fixed income space has undergone a significant transformation and reallocation implications reverberate into 2023. This has resulted in a year-to-date influx of USD 87bn in global fixed income ETFs.
In light of a benign outlook for fixed income assets in 2023, we recap how investors can leverage the passive toolkit. A holistic consideration of this toolkit should not only include an examination of fixed income assets most suitable, but also a consideration of the specifics of the investment vehicles utilised. Afterall, the efficacy of ETFs as a means of accessing the fixed income markets can vary, and investors would be welladvised to uphold the principles they adopted in the past decade of ultra-low interest rates: Utilising the full breadth of the passive fixed income toolkit, but always with a focus on efficient replication. In the following we recap three essential dimensions investors should be mindful of: (i) a growing core, (ii) the role of innovative solutions and (iii) the metrics to watch in implementation.
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