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Finding value in core bonds
Portfolio manager Brian Day discusses how Fidelity Investment Grade Bond can provide investors one-stop access to a diverse group of predominantly U.S. high-quality bonds, providing income and capital preservation.
- With return dispersion among fixed income asset classes low and credit spreads stubbornly pegged at the tighter end of historical averages across most sectors, Fidelity Investment Grade Bond is positioned with low levels of corporate credit exposure relative to history due mainly to tight valuations.
- Despite lower levels of corporate credit exposure, Fidelity Investment Grade Bond maintains a modest yield advantage relative to its benchmark index, driven by actively investing in markets that are less efficient and tend to offer better relative value, such as non-agency securitized investments: commercial mortgage-backed securities (CMBS), collateralized loan obligations (CLOs), and asset-backed securities (ABS).
- Within the ABS category, Portfolio Manager Brian Day and his co-managers recently have favored bonds backed by the aircraft industry, which offer structural protections and attractive yields. Aircraft leasing ABS are backed by loans and/or leases of various aircraft types and engines.
- Aircraft leasing ABS is a great example of the power of Fidelity's active management, according to Day, because analysts have recognized that there is a structural shortage of aircraft due to manufacturing delays and it will take years before returning to equilibrium. This dynamic has fueled a very liquid secondary market, making it much easier to re-lease planes and sell older aircrafts – both of which support the securitizations they back.
- An actively managed core bond portfolio can offer many of the characteristics that investors have come to expect from bonds, including: income generation, diversification, and capital preservation.
Learn more about Fidelity's income strategies managed by our featured speaker.
Fidelity Advisor Investment Grade Bond Fund
A core fixed income strategy providing one-stop access to a diverse group of high-quality U.S. bonds.
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Fidelity Investment Grade Bond Fund
A core fixed income strategy providing one-stop access to a diverse group of high-quality U.S. bonds.
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Fidelity Investment Grade Bond ETF
A core fixed income strategy providing one-stop access to a diverse group of high-quality U.S. bonds.
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Views expressed are as of the data indicated, based on the information available at that time, and may change based on the market and other conditions. Unless otherwise noted, the opinions provided are those of the authors and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.