Jason England, a manager of the Janus Henderson Absolute Return Income strategy, discusses the relationship between yield curves and duration, their approach to volatility, and how absolute return income can complement conventional fixed income approaches
What rate decisions do you expect to see from the Fed this year?
We were in the dovish camp going through the third and fourth quarter of 2018. We've always believed that the US Federal Reserve (Fed) overpromises and under delivers so after the pivot in January, we're expecting zero hikes this year. We take the pivot to mean they are now going to be patient and flexible going forward; it's going to take a lot for them
to move because of the data. Inflation is pretty much contained at or near their 2% target so unless we see something in jobs and inflation, and we see reduced risk in the global geopolitical context, we're more in the dovish camp.
In a market short on diversity and returns does the absolute return sector now have more appeal?
With a lot of the indexed products you may not be getting an attractive risk/ return profile given the yield and duration risk. We can get close to or near the yield, but with a lot less duration risk because we're not managing to an index. We don't need to go in and populate our portfolio with what's in an index. We don't need to be US-centric or Europe-centric. We can be a truly global, fixed income absolute return portfolio that doesn't adhere to the biases
required when managing towards an index. So I think absolute return income should be part of an investor's toolkit. We've seen it here in the US as rates have started to move up; the demand is there for people to step into an asset that's maybe a complement to their core book, where they're not taking as much duration risk but they can still get an attractive yield.
Click here to learn more about Janus Henderson's absolute return income strategy.
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