Demand for active fixed income has materially increased in 2023 due to a combination of secular and cyclical factors. Adoption is up due to institutions and advisors becoming more familiar with the new category, while recent data supports the notion that it can outperform passive at least in specific circumstances. From a cyclical perspective, higher rates and increased volatility are also leading to more demand for active fixed income products as managers have more latitude in terms of duration and credit risk. 

AllianceBernstein recommends a systematic approach to fixed income in order to outperform benchmarks. It sorts through criteria to identify predictive factors which goes deeper than the traditional approach of duration, beta, and sector. 

This criteria includes value, momentum, fundamentals, company financials, and historical market data. Many factors are only applied during specific market regimes when they have greater predictive power. 

This strategy allows for increased diversification as returns are uncorrelated from benchmarks and other factors. They also typically have lower costs while allowing for greater customization to fit client needs. This sort of quantitative, factor-based investing is more prevalent in equities, but the company is looking to bring it to fixed income.

Finsum: AllianceBernstein recommends a systematic, quantitative approach when it comes to active fixed income. The key ingredient is dynamic weighing of quantitative factors.

Over the last decades, there has been a constant trend in equities trading towards lower transaction costs, increased transparency, fractionalization which have made the markets cheaper and more accessible for everyone. This is only beginning to happen in bond markets where the majority of trading still takes place over the counter.

One startup, Moment, is taking on the challenge as it’s raising $17 million in a Series A round led by Andreessen Horowitz. It’s expected to be a major opportunity especially as interest in trading bonds has increased amid the spike in rates since last year. 

Currently, the major electronic venues for trading bonds are MarketAxess and Tradeweb. Moment’s API seeks to pull data from all these fragmented markets and liquidity pools and provides execution services in addition to analytics and portfolio management tools. The company plans to cover all types of fixed income investments including municipal bonds, Treasuries, and corporate debt. 

The company believes it will be able to be the premier platform for retail investors when it comes to fixed income trading. It sees upside opportunity in that only 3% of US households own individual bonds, while 23% of households own individual equities. 

Finsum: Interest and activity in fixed income has soared along with rates. Moment, a startup backed by Andreesen Horowitz, is looking to build a platform for retail trading of bonds.

In a strategy note, Scott Welch, the CIO of Model Portfolios at WisdomTree Investments, discusses how markets are unusually calm right now but from a seasonal perspective, investors should get ready for a surge in volatility. 

Currently, markets are at their ‘calmest’ since prior to the pandemic, this is evident through the Vix or credit spreads although bond market volatility is elevated. Historically, volatility does tend to increase between September and November especially as trading volumes increase, and people become more mindful of risks.

According to WisdomTree, markets are currently not accounting for a slowing economy, hawkish Fed, and geopolitical tensions. The firm recommends that investors prioritize quality in their portfolios by prioritizing cash flow, strong balance sheets, and operational efficiency as these companies are best suited to handle a downturn in economic conditions.

The second consideration is sufficient diversification at the asset class and risk levels. This is a necessary antidote as many investors are tempted to veer away from their plan during these periods of volatility. With proper diversification and rebalancing, these periods can be used advantageously. 

Finally, it recommends investing in less followed parts of the market like managed futures, floating rate Treasuries, or commodities. These alternative asset classes can also provide additional diversification while outperforming in volatile markets. 

Finsum: WisdomTree shares some thoughts on the current state of the market, and why investors should prepare for a surge in volatility.

The old balancing act. You know; the one where retirees seek a balance between gaining a foothold on sufficient income and hanging on to wealth.

Oh yeah. That one. Look out below, because it can be precarious, according to thestreet.com.

Well, consider this tactic: an allocation to cash like, short direction, high quality bond ETFs, supplanting part of the usual aggregate bond fund allocation.

In light of a jump in interest rates, the inclination is for a sag in bond prices, putting a dent in the value of bond funds. That’s when short duration, high quality bond ETFs can provide a buffer.

On the other hand, investors, regardless of age and stages of life, are right for ETFs – and especially so for retirees on the precipice of retirement, according to moneysense.ca.

Within the financial cycle, The Money Sense ETF list is right for all ages and stages, retirees can safely contemplate a solid subset of picks. A panel of seven ETF experts selects the list. The panel didn’t per se formally designate any of its picks as “retirement friendly,”

Think recruiting for succession planning is a piece of proverbial cake? Well, ha!

That’s because, to the contrary, errors can be common, according to linkedin.com. So, how do you increase your chances of sidestepping them in the recruiting process aimed at such planning? 

A few tips:

• Assess your current and future needs
• Develop a talent pool and a succession plan
• Use objective and consistent methods
• Involve multiple stakeholders and perspectives
• Monitor and evaluate your results

Now, ask yourself: if your most essential employees bolted – and bolted today – would you be up the old creek – or do you have a successor who had the knowledge, training and skills to pay dividends and fill the void?

Workplace data’s all that and more, according to hr.nih/gov. It can abet your ability to visualize your workforce, such as, for instance, the volume of employees eligible to call it a day. Well, leveraging data, you can visualize representation of the workforce, which is a great way to gain support – not to mention – interest, in succession planning.

Here’s a suggestion: in the course or workforce discussion, strategic planning – and as you break bread over your mission -- provide your leadership with a summary of workforce data, complete with the snapshot. Doing so will reinforce how important workforce planning is.