After a three-decade bull market in bonds, changes in U.S. interest rates going forward will likely be more symmetrical. With the Federal Reserve in the midst of a rate hiking cycle, some fixed income investors may now be looking for strategies that can provide higher yields than cash and also guard against a rise in rates. One alternative, an absolute return fixed income strategy, may meet both of these objectives.

InThe Return of Absolute Return Fixed Income, PGIM Fixed Income Senior Investment Officer Michael Collins discusses different types of absolute return fixed income portfolios and how a well-diversified, duration-constrained portfolio can take advantage of alpha-generating opportunities while avoiding systematic exposure to rising interest rates.

Absolute return fixed income strategies go by a number of different names: absolute return, unconstrained, real return, strategic alpha, opportunistic, strategic income, non-traditional, and even go-anywhere or GA fixed income. Regardless of the name, these strategies generally share two common traits:

They strive to deliver positive absolute returns over a specified period regardless of the direction of interest rates.

Unlike traditional fixed income strategies, they are not typically managed against a market-capitalization weighted bond index. Rather, they are often managed against a cash-based benchmark such as 3-month LIBOR, 3-month Treasury bill, or any countrys money market (risk-free) rate.

The defining feature of these types of strategies is that they are opportunistic. In most cases, they can select from a broad array of security types and go-anywhere within the fixed income market in search of attractive returns.

ReadThe Return of Absolute Return Fixed Income.Want to talk to Mike Collins? ContactClaire Currie.

Receive alerts on new stories, articles, and more by subscribing to one or more RSS Feeds.

The following links will open in a new window:

For Professional Investors only. All investments involve risk, including the possible loss of capital.

It is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. PGIM, Inc., is the principal asset management business of PFIand is a registered investment advisor with the US Securities and Exchange Commission. PGIM is a trading name of PGIM, Inc and its global the United Kingdom, and various European Economic Area jurisdictions, information is issued by PGIM Limited, an indirect subsidiary of PGIM, Inc.PGIM Limited registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR is authorised and regulated by the Financial Conduct Authority of the United Kingdom (registration number 193418) and duly passported in various jurisdictions in the EEA.This information is intended only for persons who are professional clients or eligible counterparties for the purposes of the Financial Conduct Authority�s Conduct of Business.In Japan, investment management services are made available by PGIM Japan,Co. Ltd., (PGIM Japan), a registered Financial Instruments Business Operator with the Financial Services Agency of Japan. In Hong Kong, information is presented by representatives of PGIM (Hong Kong) Limited, a regulated entity with the Securities and Futures Commission in Hong Kong to professional investors as defined in Part 1 of Schedule 1 of the Securities and Futures Ordinance. In Singapore, information is issued by PGIM (Singapore) Pte. Ltd. (�PGIM Singapore�), a Singapore investment manager that is licensed as a capital markets service license holder by the Monetary Authority of Singapore and an exempt financial adviser. These materials are issued by PGIM Singapore for the general information of �institutional investors� pursuant to Section 304 of the Securities and Futures Act, Chapter 289 of Singapore (the �SFA�) and �accredited investors� and other relevant persons in accordance with the conditions specified in Sections 305 of the SFA.In South Korea, information is issued by PGIM, Inc., which is licensed to provide discretionary investment management services directly to South Korean qualified institutional investors.

PFI of the United States is not affiliated in any manner with Prudential plc, a company incorporated in the United Kingdom.PGIM, the PGIM logo and Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide.

The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary under ERISA, any Department of Labor regulations or any other statutes or regulations.

©Prudential Financial, Inc. and its related entities.

This area is reserved for members of the news media. If you qualify, pleaseupdate your user profileand check the box marked Check here to register as an accredited member of the news media. Please include any notes in the Supporting information for media credentials box. We will notify you of your status via e-mail in one business day.