The tide has turned in fixed income

Passive investors in bonds have been used to sailing in calm waters with a near constant following wind. Now the tide has turned. Investors need to change their approach for the following well-documented reasons:

• Rising inflation
• Change in monetary policy
• Geopolitical risks

Overall, we expect higher volatility than during the years of QE.

Bond investors will need the ability to react to sudden changes in credit conditions, interest rate shifts and currency moves. Passive investing will not produce the same results as we have seen in the period since the Global Financial Crisis. Active managers have the ability to hedge risks, seek out isolated opportunities and change course when required. Make sure you are in the right boat!