The last two years were challenging for bond investors. What do you think of the landscape today?

The fixed income market is in a very different place today than it was in 2022 and 2023. Bond markets have adjusted to a higher interest-rate regime, the Federal Reserve (Fed) is done raising rates, and core inflation is trending down, leading us to believe the prospects for U.S. fixed income look positive in the months ahead.

Investors have opportunity to reap the benefits of higher starting yields, with a lower risk of rates rising (and bond prices falling) further from here. In fact, U.S. fixed income is offering some of the most attractive yields since before the Global Financial Crisis (GFC).

Where do you see the most attractive opportunities in the asset class?

Treasury bonds now comfortably offer investors returns above inflation. Credit spread sectors – bonds that pay an additional yield above the Treasury rate – such as corporates and securitized assets are offering even higher real returns. But we are most focused on the securitized sector, in which certain types of assets, such as auto loans or mortgages, are pooled, repackaged into interest-bearing securities, and sold to investors who in turn receive the interest and principal payments on those underlying loans.

While yields are higher across the board with the uptick in risk-free government bond yields, the change in the credit spread that compensates investors for higher-risk securities has varied. Securitized credit spreads look more attractive to us relative to investment-grade (IG) corporate bonds, particularly given continued potential for a range of economic outcomes.

For example, securitized sectors appear to be pricing in the still-lingering risk of economic slowdown to a better extent than corporate bonds. In our view, this divergence has created opportunity for better risk adjusted returns in securitized sectors.

Does a multi-sector approach give investors better access to market opportunities?

The investable fixed income universe in the U.S. – the largest in the world – is both broad and deep in scope. It isn’t critical to always be fully invested across all sectors, but we do think bond investors should have access to all sectors.

While not without merits, the Bloomberg U.S. Aggregate Bond Index, which has traditionally served as a proxy benchmark for a diversified bond allocation, does not accurately represent the full fixed income universe. In our view, a flexible, multi-sector mandate that allows a manager to be unbound by such benchmark limitations has a better chance at offering investors appropriate exposure across the broad market spectrum, and with it, better return opportunities.

How does the Multi-Sector Income Fund help investors capitalize on opportunities in the fixed income market while also managing risk?

Two main risks challenge fixed income investors: rate risk and credit risk. The value in a multi-sector portfolio is in being truly multi-sector – that is, having the ability to adjust the portfolio to take advantage of opportunities in the market and to shift away from risks that materialize. Over the Fund’s history, we have sought to navigate markets by adjusting our exposure across corporate and securitized credit, seeking uncorrelated risk factors to build a well-diversified portfolio.

We believe the portfolio’s structure may lead to less rate sensitivity than a traditional core fixed income investment and less credit sensitivity than high-yield investments, helping investors navigate these two key risks and create a less volatile return and income stream.

What is unique about the investment management style of the Multi-Sector Income Fund?

The Fund is managed by its three founding portfolio managers, who have more than 75 years of combined investment industry experience and complementary expertise in investment-grade, high-yield, and securitized assets.

We actively adapt and dynamically adjust allocations along with changing interest-rate and credit-risk environments. We are dedicated to building a high-conviction portfolio and rely on our bottom-up research to identify the strongest opportunities across the entire fixed income universe, without benchmark limitations.

In this way, we help investors take advantage of the best risk-adjusted opportunities across fixed income sectors, while also helping them manage risk throughout market cycles.

What role can the Fund play in a portfolio?

The Fund is designed to provide greater yield than a traditional core plus portfolio and less downside volatility than a traditional high-yield portfolio.

Given its exposure to higher-yielding opportunities, the Fund may serve to complement and diversify a core fixed income allocation. It may also be suitable for investors looking for a current monthly income stream.