Broad fixed income indices have struggled during the first half of 2021 with the Bloomberg Barclays U.S. Aggregate Index declining 1.6%. Investors who rely on broad index exposure for fixed income face several challenges, such as low yields, higher inflation, and limited sector diversification. The 10 Year Treasury finished the quarter at a paltry yield of just 1.45%, and the trailing 12-month yield on the iShares Core US Aggregate Bond ETF was less than 2%. After accounting for inflation, these investments have a negative yield.
Some investors believe buying an index gives you exposure to the entire asset class. However, that is not the case with the Bloomberg Barclays U.S. Aggregate Index. It primarily has exposure to just 3 sectors: U.S. Treasuries, Agency Mortgage-Backed Securities, and Investment-Grade Corporate Bonds. These sectors represent only half of the fixed income market.
We believe tactical and active management is better positioned to take advantage of the full opportunity set in fixed income, and we employ several tactical and active fixed income strategies in our models. These strategies have shown resiliency in the current environment, all outperforming the U.S. Aggregate index over 6 months and 1 year. Below is a brief update on each strategy:
- PFG Active Core Bond Strategy – focused on diversified sources of yield with a tilt to high-quality corporate bonds.
- PFG BNY Mellon Diversifier Strategy – designed to perform well in rising-rate and inflationary periods; an overweight to real return strategies has been beneficial.
- PFG American Funds Conservative Income Strategy – supported by a lower sensitivity to changes in interest rates and globally diversified sources of income.
- PFG Tactical Income Strategy – allocations to tactical high yield and dividend-paying equities have led performance.
Below you will find performance charts for the PFG Strategies primarily comprised of fixed income. Performance relative to the Bloomberg Barclays U.S. Aggregate Index has been strong, with all strategies ahead on a year-to-date and one-year basis. Overall, we believe these tactical and actively managed strategies will continue to add value to our models.
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Disclosure: Advisory services provided by The Pacific Financial Group, Inc. (“TPFG”) a Registered Investment Adviser. The information is for informational purposes only and should not be relied on or deemed the provision of tax, legal, accounting or investment advice. Past performance is not a guarantee future results. All investments contain risks to include the total loss of invested principal. Diversification does not protect against the risk of loss. Investors should review all offering documents and disclosures and should consult their tax, legal or financial professional before investing. All information is believed to be accurate but has not been independently verified and TPFG makes no warranties as to the accuracy of the information or any representations made or implied.