The fixed interest portion of diversified portfolios has traditionally been used to dampen the volatility of risk assets and optimise the risk/return efficiency of portfolios.
Fixed interest has also had the ability to provide portfolio income enhancement, however, with the relentless decline in fixed interest yields over several decades this role has diminished.
The huge decline in available yields naturally poses the question of whether an allocation to fixed interest is still worthwhile?
We still think the answer is yes, but believe investors need to consider non-traditional types of fixed interest strategies, alongside a broader range of portfolio diversifiers.
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David is one of Australia’s leading investment strategists.