In addition, investors today are increasingly evaluating what their strategic fixed income benchmarks should be, and not always accepting capitalization-weighted indices as their only options. This change in mindset is challenging the simplicity of traditional active/passive thinking and giving rise to more custom exposure design and management.

With more than 1000 institutional clients across 50 countries, and $1.2 trillion USD under management in total fixed income, cash, and currency, State Street Global Advisors is at the forefront of developing innovative, efficient solutions that expand the possibilities of what investors can achieve in their fixed income portfolios.

The Evolution of the Fixed Income Market

The structure of the bond market has been evolving, partly in response to an expansion in electronic trading and the rapid growth of fixed-income ETFs. As a result, improved liquidity and lower transaction costs are paving the way for a broader set of approaches available to fixed income investors. This much more diverse array of strategies progresses from a no-alpha/replication approach through stratified sampling, enhanced indexing, active (both fundamental and now systematic), and finally to, essentially, unconstrained. We believe it’s important for investors to appreciate the full spectrum of investment styles, and the pros and cons associated with each, so as to better choose which are most appropriate for them to deliver on their own specific fixed income objectives. In Figure 1 we outline how each of these styles is positioned along the continuum and where they fall on the active risk and return spectrum.

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