Traditional fixed income has been available as a counterbalance to equity exposure. Historically, it has offered consistently positive total returns due to a 30-year bull market in rates.1
However, rates have declined nearly as far as they can and are starting to rise. This could lead to negative total returns for some plan participants and cause plan sponsors to explore opportunities to diversify their plans' fixed income options.
1Source: Barclays Capital as of June 30, 2013. The return components (i.e total return) accounts for two categories of fixed income return: income (i.e. coupon return) and price return. Income includes interest paid by the fixed-income investments, whereas price return represents the change in the market price of the fixed income security, which, depending on market conditions, can be negative. It is not possible to invest directly in an unmanaged index. Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.