Income Fund Update: Building Resilience and Harnessing Yield in High Quality Assets


  • Amid sharply higher interest rates and a looming recession, we’ve increased our interest rate exposure slightly but remain somewhat defensive. We prefer shorter maturity, high-quality fixed income, which offers better yields than we’ve seen in more than a decade, and the potential for attractive total returns should interest rates decline.
  • We remain conservatively positioned across the credit markets, focusing on high quality and more senior positions – especially in the securitized credit markets – where we can potentially earn yields in the 6% to 6.5% range without taking excessive risk.
  • We have been steadily adding U.S. agency MBS. These securities are designed to offer a guarantee from the government or an agency of the government, ample liquidity, historically attractive spreads, and complexity that creates inherent inefficiencies – providing potential advantages for skilled active managers.
  • Our corporate credit exposure is largely limited to select names and sectors in the investment grade market and the higher-rated segments of the high-yield market that look attractive as motivated sellers drive prices down.
  • In emerging markets, we have reduced our exposure, particularly in areas such as Europe and China that are mired in geopolitical uncertainty. Our positions remain mostly in high-quality sovereign or quasi-sovereign exposure.