NEW CENTURY ADVISORS, LLC: Rethinking Fixed Income

Terra Nova

Scarcely a generation ago, buy and hold investing was the default approach for fixed income portfolios.

Today, fixed income investing is a radically different world. The economic and market forces of the past two decades have changed everything. Globalized markets, emerging economies, compressed economic cycles, demographic changes, disintermediation—all have turned traditional asset classes on their ears. The result has been a steady stream of financial innovation—from mortgage- and asset-backed securities to CMOs, CDOs and CMBSs, from strips and swaps to, most recently, inflation-exposure and inflation-linked securities.

Alongside this ever-expanding menu of investment vehicles has emerged an abundance of investment approaches, analytic tools and technologies, all designed to wrest greater returns, parse and manage risk, and expand the roles of fixed income in portfolios. Today's new tools enable targeted strategies as well as enhanced risk control. Newer approaches to asset allocation challenge the standard mean variance optimization approach of the past. Newfound efficiencies allow investors to allocate more funds to high-return strategies. Today's fixed income strategies can deliver equity-like returns as well as inflation protection.

With a wealth of marketplace innovation, we believe opportunities for the fixed income investor have never been better—or so diverse. And as the investment environment has changed, so have investors. Investors today are savvier. They are seeking true portfolio diversifiers. They can discern the difference between asset exposure (beta) and manager skill (alpha). 

Indeed, there's little "fixed" about today's fixed income.