The benefits of a global approach to fixed income | Insight Investment

Many investors focus only on their local market. We explain the benefits of a global approach and show how a much larger investment universe can offer access to wider opportunities, helping investors achieve their goals with greater confidence.

• The global fixed income market offers a significantly larger range of investment opportunities than the regional markets that comprise it. By adopting a global approach, investors can enhance their access to specific sectors and improve diversification, while also creating opportunities for relative-value positions. For instance, a European investor can gain greater access to technology sector issuance in US dollar-denominated credit. Similarly, an Asian investor looking to buy the debt of a large US corporate may find wider  spreads in euros than in US dollars.
• A global approach can allow investors to potentially enhance returns, reduce risk and build a portfolio that more precisely meets their needs. Different regional markets offer varying yields, spreads, and sensitivity to interest rates, influenced by a range of underlying macroeconomic and market drivers. At a security-specific level, investors could access different instruments from the same underlying issuer at terms that better align with their requirements. Currency hedging can be used to mitigate a key risk for investors venturing beyond their domestic market.
• An intentional approach to fixed income, with the ability to invest globally, can offer investors the key to achieving their goals. Investing passively in an index, whether local or global, exposes an investor to the weaknesses of fixed income indices. An active approach could also take advantage of inefficiencies common to such indices.