It’s an attractive time to be in fixed income, given the positive macroeconomic environment and the Federal Reserve’s supportive stance as inflation moderates. Institutional investors can reach for meaningful all-in yields across the risk spectrum that meet their risk-adjusted return targets, while achieving appropriate diversification in overall asset allocation.

The Institutional Investor’s Guide to Fixed Income, in partnership with MFS Investment Management, is updated for 2024 with current market perspective and data. It provides an overview of the fixed-income market and its segments, explores current opportunities to consider and points to the key indicators that help navigate this asset class. The Guide explains key characteristics of public fixed income and makes a compelling case for active management. MFS also shares use cases for actively managed fixed income that address the specific portfolio needs of different types of allocators — and that points to the need for a flexible and responsive approach in fixed-income management today.

I

State of the U.S. Market

The higher-for-longer scenario — the Federal Reserve’s stance to keep interest rates high for a longer period as the U.S. economy has been more resilient than expected — has been positive for fixed income in delivering strong total returns. “If you can continue to get, say, 5% to 6% returns on public investment-grade fixed income, especially when you compare that to the private credit markets where there may be more risk, that’s attractive for institutional allocators today,” said Brad Rutan, managing director and market strategist at MFS Investment Management.

Yet investors aren’t staying sanguine in this overall supportive environment for fixed income. They have a watchful eye on the potential impacts of higher rates on consumers and businesses as well as the fiscal policy shifts that could follow the U.S. elections in November. Duration and credit quality are top of mind as long-term allocators look to navigate their way through short-term market volatility in fixed income.

Yet investors aren’t staying sanguine in this overall supportive environment for fixed income. They have a watchful eye on the potential impacts of higher rates on consumers and businesses as well as the fiscal policy shifts that could follow the U.S. elections in November. Duration and credit quality are top of mind as long-term allocators look to navigate their way through short-term market volatility in fixed income.

The inverted Treasury yield curve — shorter maturities are at higher yields than longer-term ones — is taking longer to presage a recession than it has done in the past. The curve has seen some steepening this year — with the spread between the short end and long end normalizing — as the market priced in expectations of the Fed’s next move to cut interest rates as well as potential fiscal policy shifts under a new administration.

“We’ve already seen short-end rates start to come down as longer rates sit close to where they started the year, but we don’t think that spreads should dramatically increase,” Rutan said. “For the rest of 2024 and into 2025, there’s no reason that investors shouldn’t earn their ‘yield to worst’” — i.e., the lowest possible yield that can be received on a callable bond before its maturity date — given the overall supportive environment for fixed income.”

Higher-for-longer is a positive for fixed-income institutional allocators today, especially when you look at the private credit markets where there may be more risk.

Brad Rutan

MFS Investment Management

While duration exposure should take into account an investor’s portfolio objective and time horizon, the short and intermediate areas will likely remain the most attractive. “On the short end of the curve, we’re entering a Fed cutting cycle. How much will they cut and the runway for that is obviously unknown, but the short end will react positively, and you’re already starting at fairly high yields to begin with,” Rutan said. “We are also comfortable going out to intermediate, say the six-to-eight-year range, as you don’t need to go out all the way to the long end to realize 4% to 6% returns — which could go to 7% to 8% returns if rates come down and spreads remain well behaved.”

Elections tend to impact the bond markets even more than the equity markets, and this one will be no different “with fiscal policy being the biggest driver: Are we cutting back on taxes or raising taxes? That will affect how much we need to borrow because we spend so much in this country,” Rutan said. Under a Republican administration, taxes could likely come down, but issuance could increase and interest rates would likely remain higher for longer; under a Democratic one, tax revenues would likely be higher with the opposite implications for issuance and interest rates, all else being equal. “We don’t expect either candidate to reduce spending, which could put a floor under rates,” he added.

Despite the widely held view by fixed-income investors that the Fed is close to pulling off a soft landing — when a rate-hiking cycle successfully quells inflation followed by a subsequent slowdown in growth but without severe job losses — it’s important to look at the implications for specific asset performance and the resilience of individual issuers. “The focus should be on what has already happened and how it will affect future cash flows,” said Rob Almeida, global investment strategist and portfolio manager at MFS. “How are higher interest rates going to affect consumers’ ability to spend when their mortgage payments and credit card balances are higher? How is that going to affect companies’ profitability, now that their funding costs are so much higher?”

Central bank interventions are only one piece of the puzzle. “I appreciate why the world is so focused on what central banks may do, but that’s somewhat immaterial relative to what they have already done and how that will affect households, businesses and, ultimately, financial assets,” Almeida said.

To fully appreciate how high interest rates — the effective Fed funds rate has been 5.25% to 5.50% since July 2023 — are threatening corporate cash flows and, therefore, credit quality, investors should remember that years of low rates set the table for what’s happening today. Funding was readily available to borrowers of all kinds, which also meant that weaker entities, which otherwise might have gone out of business, were able to finance themselves and stay afloat, Almeida noted.

The Fed’s dramatic shift to a tightening rate cycle from 2022 onwards, as it sought to crush inflation, has reversed this paradigm. Markets will now reallocate capital from the least fit back to the fittest, in Almeida’s view, and fixed-income investors will need to focus on identifying the fittest companies and assets that can outperform in the tougher market environment.

For fixed-income investors, higher yields — whether caused by Fed tightening, falling bond prices or both — helped restore the usefulness and appeal of the asset class. Several segments of public fixed income continue to offer yields rarely seen over the past decade-plus, making them more competitive with private assets that require a higher investor tolerance for risk.

However, fixed income’s role as a diversifier to equities has become more limited, given the continued high correlation between the two asset classes pointing to increased overall portfolio risk.¹ While fixed income may not deliver the same type of portfolio diversification as in the past, it can function as a volatility diversifier and provide broader overall portfolio exposure via global bond market allocations.

Read More: The Big Mac on Fixed Income Allocation: The Role of Fixed Income in a Positively Correlated World

The Return of Diversification
Comparative view of fixed income correlations vs. the S&P 500
(For the 2003 to 2021 period vs. 2022, 2023 and 2024 YTD)

Source: All index returns are total returns. S&P 500 represented by S&P 500 Index. U.S. high-yield corporates representd by Bloomberg U.S. Corporate High Yield Index. Non-U.S. investment grade represented by Bloomberg Global Aggregate - Corporate Ex US Index (hedged to USD). U.S. investment grade corporates represented by Bloomberg U.S. Corporate Bond Index. U.S. mortgage-backed securities represented by Bloomberg U.S. Mortgage-Backed Securities Index. U.S. Treasuries represented by Bloomberg U.S. Treasury Bond Index. 2003 - 2021 period is as of 1 July 2003 to 31 December 2021. 2024 is year-to-date as of 31 July 2024.

II

Scope of the U.S. Market

There are 13,627 U.S. investment-grade securities, 1,932 U.S. high-yield corporate issues and 58,881 municipal issues¹ whose total is more than 13 times the approximately 5,500 companies traded on U.S. stock exchanges.²

Equities have a bigger market value ($54.0 trillion³ versus $30.9 trillion for fixed income⁴), though, because their prices are uncapped — many shares trade in the hundreds or even thousands of dollars — while debt issues are priced relative to par to reflect their yield to maturity.

Private debt is capital lent by nonbank entities to nonpublic companies, usually in the small and middle markets. It is typically investment grade and takes the form of floating-rate loans, which greatly benefits investors during periods of high rates and inflation.

But private debt has a major drawback when compared with public fixed income: Since it doesn’t trade, it’s not marked to market, and changes in valuations lag those of publicly traded securities. This lag can be a drag on portfolio returns in periods when rates fall and valuations of public fixed income improve.

Read: The Big Mac on Fixed Income Allocation: FIFOMO

III

The Case for Active Management

“Fixed income is uniquely suited to active management,” Rutan said. “Compared to the equity market, where alpha is primarily driven by sector allocation and security selection, fixed income offers many more opportunities to generate alpha. In addition to sector and security, you can generate excess returns through duration, country/curve management, quality and currency,” he said.

“The key to active management in fixed income is the sheer amount and scope of fixed-income instruments. The market’s scale and lack of uniformity create pricing inefficiencies that experienced managers can exploit,” he added.

Compared to the equity market, where alpha is primarily driven by sector allocation and security selection, fixed income offers many more opportunities to generate alpha.

Brad Rutan

MFS Investment Management

Active management has arguably become more imperative today. Investment-grade spreads — the yield over Treasuries of the same maturity — are at or close to cycle lows, making this segment’s valuation expensive compared to the last two decades, Rutan pointed out. That has led to MFS holding significant liquidity positions, via Treasuries and mortgages, in flexible strategies that can be tactically deployed when spreads start to widen. “Unless you think that investment-grade fixed income can stay this expensive forever, eventually spreads will move wider. And the only way to capitalize on that is to have a portion of your strategy in pure liquidity, which you can move into risk assets as they become cheaper,” he said, noting that tactical positioning is not available to passive investors.

“We pray for volatility every day,” Rutan said. “We hope spreads widen 100 basis points tomorrow, because as spreads move up and down, that’s where we can add value. Active is the way that you can take advantage of spreads when they widen or tighten.”

There’s an additional market driver to seek out fixed income’s potential alpha: The periods in which spreads have widened or tightened have become much shorter since the Great Financial Crisis. This has increased market volatility, enabling active managers to find attractive tactical opportunities.

In the past 15 years, Rutan explained, “the amount of time it takes for spreads to go from peak to trough, or trough to peak, has shrunk. It used to take five-plus years on average for spreads to widen or tighten, and now it’s around 17 months,” as of July 2024.

In addition, “we’re getting four times as many tightening or widening events, which means four times the number of opportunities to add or reduce risk based on where valuations are. This really lends itself to active management. If you’re watching these markets and you’re disciplined around valuations, it’s a big alpha opportunity,” Rutan said.

Mini-Credit Cycles Have Emerged

Shaded areas represent periods of significant spread widening.
Source: Bloomberg. Weekly data from 03-01-1991 through 08-09-2024. US Investment Grade Corporate = Bloomberg US Aggregate Corporate Bond Index. OAS = option adjusted spread. Cycle lengths are determined based on both periods of spread tightening and spread widening, Global Financial Crisis is excluded from either period.

“Investing is simple but hard. It’s simple in that cash flows drive prices of all financial assets, but hard because the future has no facts,” said Almeida. “MFS brings a large group of people with different coverages to think about an enterprise through a variety of lenses in order to expose as many risk factors as we can. Through this process, we aim to identify the ranges of potential outcomes for every company and asset, and we assess if we’re being appropriately compensated for those outcomes.”

For MFS, research is one is the core of the investment approach, how the firm adds value and a vital element of its culture. Active fixed-income management isn’t possible without it.

The key to active management in fixed income is the sheer amount and scope of fixed-income instruments. The market’s scale and lack of uniformity create pricing inefficiencies that experienced managers can exploit.

Brad Rutan

MFS Investment Management

A collaborative culture, in which analysts engage and work together across asset classes, underlies MFS research. While both fixed-income and equity analysts study cash flows, fixed-income analysts also focus on credit risk while equity analysts focus on earnings — thereby enhancing each other’s perspective. Together they can identify risks and opportunities they might not have seen individually. Exchanging ideas helps both sides think bigger and more deeply at the same time.

A good example of this collaboration is joint meetings between MFS equity and fixed income teams and company managements. CEOs, for example, want to speak to equity managers and analysts because much of CEO compensation is based on the company’s stock price. But the fixed-income team maintains ongoing updates on the company’s ability to service its debt. In MFS’ view, management will be more candid when it has to respond to equity and debt investors at the same time.

MFS believes that analysts are most effective as specialists, versus generalists. In fixed income, this approach means that analysts focus on specific debt sectors and industries (for corporate debt). Such specialization, in turn, allows the fixed-income team to look for value by comparing spreads in numerous areas, notably:

To deliver this highly specialized approach, MFS has doubled its fixed-income research headcount so that its analysts grew from 30% to 40% of total investment staffing. Its analysts are located across the world so that they can meet in person with issuers almost anywhere.

In addition, “we’ve covered multiple publicly traded companies that went private by continuing to follow their debt. Some of these companies went public again, so that continuity of coverage can be very beneficial,” Rutan said. “Also, research is as vital in the private markets because there’s less access to data. You don’t get the regular filings like you do in the public markets. You need skilled analysts to dive into companies, whether they’re public or private. Our analysts cover both.”

Read: Uncertainty Is Non-Linear

At first glance, passive management might not make sense for fixed-income portfolios today. The same huge quantity and variety of debt issues that favor an active approach can appear too unwieldy for passive replication.

Yet, as institutional and retail investors have sought cost-efficient ways to achieve market-level exposure, the share of passive fixed-income AUM has risen to 37.6% of that of total fixed income as of June 30, 2023, up from 30.8% in June 2020, according to data from Morningstar.

There’s a place in an institutional allocator’s core portfolio for passive exposure, such as strategies that mimic the Bloomberg U.S. Aggregate Bond index, to provide higher duration and credit quality, Rutan said. “Then, you can use active around that and move into the various risk markets and credit markets when the time is right,” whether that is via high-yield managers, emerging markets managers, flexible managers or opportunistic managers that are able to navigate market shifts and deliver alpha.

In Rutan’s view, as passive continues to grow as a long-term trend, that can be favorable for active managers as well. “Passive exposure is rising,” he said, “and it’s going to be a part of the market forever. As more flows go into passive, it should create more inefficiencies and opportunities for active managers to exploit, based on how passive bond indices and exchange-traded funds are constructed.”

IV

Strategies and Opportunities

As institutional investors continue to seek help navigating macro impacts on fixed-income markets and reassess their allocations to meet their return targets, MFS’ active investment approach takes into account each plan sponsor’s overall portfolio profile and objective. Both defined benefit and defined contribution plans can evaluate opportunities for diversification and return.

Example 1:
Global bonds can add value with an LDI strateg
Traditional liability-driven investing approaches use a combination of Treasuries and U.S. investment-grade credit to create portfolios with duration profiles comparable to the pension plan’s liability. In many cases, derivatives — such as futures and swaps — are used to extend duration and fill in any “gaps” in duration that cannot be covered with physical bonds.

We believe that global bonds are best accessed through an active approach that can potentially produce relatively attractive returns through blending risks globally across credit, rates and currency.

Rob Almeida

MFS Investment Management

As DB plans mature and the participant population ages, liability duration naturally decreases. Higher rates also reduce duration, and with pension discount rates increasing by over 200 basis points in 2022, typical liability duration has decreased by two to three years. This lower-liability duration profile potentially allows for more liability to be covered with physical bonds and to reduce derivatives exposure. That can be appealing as it lowers liquidity and counterparty risks, while also lessening the governance oversight for derivatives.

While the first stop to higher bond allocations are typically U.S. Treasuries and credit, other asset classes such as global investment-grade bonds could also play an important role in an LDI portfolio. Non-U.S. dollar denominated bonds — representing more than half of the Bloomberg Agg, with over $36 trillion of bonds issued in euros, yen and other currencies — provide a broad opportunity set for investors.

With non-U.S. dollar investments, investors must consider currency risk. A U.S. DB plan would typically hedge out non-U.S. dollar exposure so that assets and liabilities are denominated in the same currency. In the current market environment, hedging non-U.S. dollar exposure, including euros and yen, has a negative cost that can benefit U.S. investors.

MFS’ analysis found that in order to consider the suitability of global bonds in a U.S. DB plan, sponsors need to consider their duration characteristics and correlation with plan liabilities and other commonly used assets.

Correlation of Global Bonds to Common LDI Asset Classes

Notes: FactSet correlations based on monthly returns from June 30, 2013, through June 30, 2023, for the following indices: Bloomberg Global Aggregate Bond index (hedged to USD), Bloomberg U.S. Aggregate Bond index, Bloomberg U.S. Aggregate Credit — Intermediate index, Bloomberg U.S. Aggregate Government & Credit — Long index, Bloomberg Global U.S. Treasury index. Source: MFS Investment Management.

MFS found a high correlation between global bonds and assets often used in LDI portfolios. It examined the correlation between global bonds and a hypothetical liability-hedging portfolio of assets comprised of 40% U.S. Treasuries, 30% U.S. intermediate credit and 30% U.S. long government credit that could hedge a hypothetical eight-year liability. The correlation was 0.95, suggesting that adding an allocation of global bonds to the portfolio would not upset its overall liability-matching profile.

Over the past 10 years, global bonds have generally kept pace with the hypothetical liability-hedging portfolio over rolling three-year periods and have slightly outperformed that portfolio with an annualized return of 2.11% versus 1.95%.¹

“While the Bloomberg Global Aggregate Bond index is a useful proxy for global bonds, we feel that a passive approach is not optimal to access the asset class,” Almeida said. “We believe that global bonds are best accessed through an active approach that can potentially produce relatively attractive returns through blending risks globally across credit, rates and currency.”

Read: The Stars May Be Aligning for EUR Credit

Example 2:
Diversifying fixed income can improve target-date fund performance Many investment managers and wealth advisors believe that as investors approach and enter retirement, they should maintain a strong equity allocation in their defined contribution plans. The underlying idea is that investors will need growth-based assets to generate additional capital as their retirement savings dissipate.

MFS’ conclusion was clear: Target-date funds with well-diversified fixed-income allocations fared much better than their less-diversified counterparts.

In light of this research, DC plan sponsors should consider taking a fresh look at fixed-income diversification within their target-date glidepaths to ensure alignment with participants’ retirement savings objectives.

Read: Revisiting the Role of Fixed Income Along the Retirement Savings Journey

Example 3:
LDI strategy with taxable municipals
The improved funded status of corporate pension plans has led many plan sponsors to accelerate their pension derisking activity, either by increasing their fixed-income allocations or engaging in pension risk transfer with a third-party insurer. As pension plans continue to refine their liability-driven strategies, typically by investing in Treasuries and investment grade credit, other asset classes such as taxable municipal bonds could also play an important role, according to MFS’ fixed income team.

In a recent MFS paper,² “With yields at multi-year highs and a market that has grown from increased supply, now may be a good time for plan sponsors and insurers to consider an allocation to taxable municipals within an LDI portfolio. We believe taxable municipals have many advantages compared to corporates, including higher quality, lower historical default rates, higher yields and broader representation in the long portion of the yield curve.” In addition, an active approach that can take advantage of the broad universe of issues by using several alpha levers in the taxable municipal space.

Read: Taxable Municipal Bonds May Hold the Key to Better LDI Portfolios

Attractive all-in yields across investment grade and high-yield fixed income globally present a breadth of opportunity for all types of long-term fixed-income allocators. But it will take careful credit selection to parse the outperformers from the laggards that may not be able to withstand the impacts from the current interest rate cycle and other market stressors.

“When you look at the yields available today, you’re getting close to 8% in high yield, which is attractive. For an active high-yield manager, your annual default rate should be significantly less than the 2% to 3% experienced in passive indices across cycles. Obviously, it will go up in a stressed environment,” Rutan said. “But you should not have, even for high yield, a huge default rate if you’re doing your research.” Overall, low default rate projections, a healthy breakeven yield valuation and supportive macroeconomic outlook make high yield a good segment to explore.

Within high yield, the capital goods and consumer noncyclicals sectors are areas to consider. The former includes aerospace, defense and building materials; the latter includes healthcare, food and beverage, base materials, metals and mining, chemicals and utilities.

But it takes looking under the hood of the high-yield index, which has seen the overall interest coverage ratio come down from close to six to under five, as companies’ interest costs have risen with persistently high rates, Rutan said. “You need to look at each company and their coverage rate — how many times can they cover their debt — because as debt interest goes up, absent their earnings going up, they are getting weaker. It’s not alarming right now on an index level, but it does get alarming when you pop the hood on some individual issues.”

You need to look at each company and their coverage rate — how many times can they cover their debt — because as debt interest goes up, absent their earnings going up, they are getting weaker.

Brad Rutan

MFS Investment Management

Emerging market debt, particularly investment-grade sovereign bonds that are providing greater than 8% yields today, also deliver a very attractive long-term yield, Rutan said. For investors with a global allocation, European high-yield and investment-grade paper offer better spreads versus the U.S. fixed-income market — where strong demand has driven spreads to historically tight levels, he said.

Read: European High Yield: High Yield, High Expectations

Institutional investors continue to pursue private debt as they are drawn to its floating-rate structure as an attractive hedge against rising rates, and its performance. As represented by the Cliffwater Direct Lending index, private debt has significantly outperformed the Bloomberg U.S. Aggregate Bond index nearly every year since 2005, when rates were low and investors looked for yield wherever it was available.

Private debt continues to make sense in multi-asset portfolios, Almeida said, though it may be prudent for institutional investors to reduce their allocations going forward as public fixed-income yields are much more competitive with those of private debt. As a result, private debt’s floating-rate structure — which proved so compelling when rates and inflation accelerated — should lose much of its appeal as rates stabilize or decline.

Another aspect of private debt, its lack of trading, can be doubly problematic for investors, Almeida said. First, in his view, the absence of daily pricing suggests that private debt’s presumed diversification benefit for public fixed income is illusory. Second, the dearth of liquidity renders it less useful for institutions with significant liquidity needs.

V

What Lies Ahead

Fixed-income investors today need to be far more discerning and selective in understanding and navigating the markets — and uncovering opportunity. MFS’ Active 360° Fixed Income Approach looks for durable credit fundamentals and attractive valuations, with a measured approach to taking on risk when compensated appropriately.

“We call it ‘FTV’: fundamentals, technicals and valuation,” Rutan said. “Fundamental strength: What’s the interest coverage or leverage ratios? What’s the profitability, the business model? What’s going to allow the company to sustain that over the life of that bond? From a technical perspective, what’s the supply and demand of those bonds in the primary and secondary market? The valuation: It’s all about spreads. What’s the excess yield you get to take on the risk of that company versus a risk-free bond?”

The central question — a simple, yet complicated one — is: “Can you pay your debt back?” Rutan said. “It comes down to: How much debt do you have? What are your earnings? What’s your free cash flow? How do you project that out via your business model? Are you looking to lower or increase your leverage ratios? And if so, why?”

For MFS’ fixed income team, that incisive analysis is core to determining the fittest and weakest companies across any market. “You should know who’s failing, who’s strong today and whether the market recognizes that or not. Our job is to differentiate that and be stubborn about what spread we require to invest in a ‘less fit’ company. It comes down to: Are we compensated to own something that isn’t the strongest, i.e., triple-A rated? That’s based on fundamentals.”

We think this new environment should set the stage for a multiyear transition in leadership from nondiscretionary portfolios to fundamentally oriented active strategies and potentially create significant opportunities for alpha generation.

Rob Almeida

MFS Investment Management

“Higher rates, higher labor costs, onshoring, climate change: All of this is costing companies more money,” Almeida said. “It raises capital intensity, which then reduces the return on the business. Whether you own the equity or the debt, if that company is no longer economically viable because it can’t survive in this more competitive world, that’s what’s most relevant.”

While macroeconomic drivers and central bank moves get the headlines and certainly are important, they are pieces of a much larger mosaic where individual issuers need to navigate through challenging market cycles and generate sufficient cash flow to service and pay off their debt. “Growth is slowing and revenues are falling. The cost of capital has taken a step function upward, higher than it has in 40 years. Labor costs, which are a company’s biggest expense, have taken a huge jump as well. How all of that flows through profit-and-loss statements is what’s going to drive the credit and equity markets going forward. Investors will distinguish between companies that can at least cover their cost of capital and those that can’t.”

One potential inflection point is a broadening of credit card delinquencies. “Credit card debt is extremely high right now. But available credit is also at an all-time high, and that could be a buffer for the consumer,” Rutan said, noting that most credit card delinquencies are among lower-income renters versus higher-income homeowners. “Currently, it’s fairly contained to renters that are more sensitive to rates and inflation, but we are watching if those credit card delinquencies start to spread to different cohorts of the economy that could become a real issue.” In addition, the disconnect between real housing inflation and how the government measures housing inflation, which is more lagged, warrants close attention.

On the corporate side, Rutan said, rising Chapter 11 bankruptcy filings are a concern if they move beyond corporate reorganizations and turn into Chapter 7 filings, which are liquidation-type scenarios. In this persistent higher-rate environment, “obviously, companies are under pressure right now and are trying to reorganize. It’s when you get to the point that you can’t reorganize and have to liquidate that will cause layoffs and more stress in the credit markets. We’re not there yet, but we are watching it closely.”

As of July 31, 2024, there were 100 bankruptcy filings by U.S. companies with liabilities greater than $50 million. Comparing the pace of filings, on an annualized basis, to other recessionary periods such as 2020, when the COVID lockdown slashed GDP by nearly one-fifth, and 2009, during the GFC, signals that the effects of tightening financial conditions are slowly being felt in the real economy, Almeida noted.

The acceleration in bankruptcies is the natural consequence of low rates and relatively cheap labor costs that enabled companies to artificially inflate their profit margins — and cash flows — prior to 2022, he said. Should this impact become more widespread and investors become more disappointed in such companies, “it will catalyze a multiyear revolution for actively managed portfolios, as a more difficult future operating environment separates the winners from the losers.”

Number of U.S. Bankruptcy Filings

Source: Bloomberg as of 31 July 2024. Number of bankruptcy filings calculated for each calendar year. 2020 bankruptcy filings is from 1 January 2024 through 1 July 2024 and is annualized (unannualized figure = 100 filings). Companies included in the count are those with liabilities greater than $50 million.

VII

Quiz

Test your knowledge on fixed income based on the information provided in this Guide. It offers a brief recap of key areas of information related to fixed income.