Fixed Income Capabilities

Fixed income investments are investments that generally deliver a regular, predetermined interest or dividend payments to investors until their maturity date. At maturity, investors are repaid the principal amount they had invested, absent insolvency or financial reorganization of the issuer.

• Stable income. Generally, fixed income investments can generate more consistent returns in the form of interest payments, unlike other investments that can be less steady and predictable.
• Diversification. As fixed income (bonds) and equity markets (stocks) are typically negatively correlated, fixed income investments offer portfolio diversification benefits for investors.^*
• Reduced credit risk. Bondholders generally are paid before shareholders in the event of an issuer’s bankruptcy, somewhat reducing the risk fixed income investors are exposed to. Additionally, some governments, such as the UK and U.S., have never defaulted on fixed income investments, meaning that the risk of default on these securities is extremely low.
  ^*Diversification cannot assure a profit or protect against loss in a declining market.

In broad terms, the most common types of bonds, that are issued by various governments and corporations. Bonds are rated by credit agencies based on the level of risk they’re exposed to. Bonds with higher credit ratings, which are at a lower risk of default but generally offer lower yields to investors, are referred to as investment grade. Contrastingly, bonds with lower credit ratings, which expose investors to a higher level of credit risk but offer higher yields in return, are referred to as high yield.

We combine original ideas and disciplined decisions in our fixed income approach. Our investment process is designed to help identify and select the best opportunities from the full range of fixed income securities seeking to deliver appropriate returns and level of risk in each portfolio. Fixed income portfolio managers are able to draw on the best ideas from our own internal proprietary credit research, based on each strategy’s objectives and intended outcome. Our people think independently and act collaboratively to develop and enhance ideas for different fixed income portfolios and objectives.

We are an active, global fixed income management firm that is relentlessly pursuing investment excellence through:

• Expertise and dedicated resources in every major global fixed income sector
• Fundamentally driven, in-depth research processes
• A culture that promotes collaboration and sharing of best ideas
• A focus on pursuing strong risk-adjusted, long-term returns
  

We are global fixed income investors with strategies focused on Europe, Asia Pacific, the United States, and emerging markets, as well as global strategies. We invest in sovereign bonds, investment-grade credit, high yield and bank loans, emerging markets, securitized debt, municipals, and cash. We also offer customized solutions. 

Lead portfolio managers set sector allocation, risk budget, currency, country/duration, and yield curve exposures. They are fully accountable for security selection working with sector teams and for the strategy’s performance. Sector portfolio managers work with the lead portfolio manager to incorporate the top-down view and contribute high-conviction security selection and execution in coordination with their respective credit research and trading teams. Each sector portfolio manager is supported by a dedicated team of research analysts and traders. Leveraging the global research teams, our experienced portfolio managers work together to strive to construct an optimal fixed income portfolio. Our experienced professionals cover all time zones and are immersed in local markets to identify and explore investment opportunities for our clients.

Our rigorous research platform includes dynamic perspectives and differentiated insights from firmwide collaboration across asset classes, sectors, and regions including directors of research, credit analysts, economists, quantitative portfolio managers, and quantitative analysts.

We offer a diversified range of strategies supported by broad sector expertise that can help you with the following:

• Capital preservation: Manage risk and seek to minimize loss by focusing on stable, low-risk investments that we believe can better withstand market volatility.
• Diversification: Diversify against correlations across your portfolio to help manage risk and reduce volatility.
• Growth: Grow your investments via exposure to higher expected return (non-investment grade) bonds.
• Income: Gain a reasonable and reliable income from your investments as a contribution to total returns.
• Inflation and rates risk reduction: Mitigate the impact of interest rate risk by focusing on strategies with low- and dynamic-duration approaches.
  

We have a process we call Policy Week. Policy Week is a set of monthly meetings designed to promote collaboration, challenge assumptions, and improve decisions. Top-down discussions of Policy Week complement our fundamental credit research process. Conviction scores, quantitative tools, and market forecasts facilitate the Policy Week process. The meeting typically covers global economics, global interest rate and currency strategy, global sector strategy, and global forecasting. 

Every credit is assigned an internal rating and conviction score by our global credit analyst team, separate from the major rating agencies. Our ratings generally have been more conservative than those of major rating agencies, and additionally, our average win/loss ratio versus the major rating agencies is greater than 2:1.¹

We integrate risk management through:

• Proprietary research to seek attractive compensation for security-level risks
• Portfolio construction to efficiently use portfolio risk budget
• Portfolio risk assessment to reveal portfolio risks under normal and adverse markets
• Oversight to ensure portfolio risks are aligned with mandates
  

No individual or team has a monopoly on good ideas. We actively nurture a culture of intellectual curiosity and empowerment. Our teams are incentivized to share insights, challenge consensus, and bring their own perspectives. We test our investment ideas across different specialist teams—the best way to gauge their risk and reward potential. This allows our fixed income analysts to build a 360-degree view of every potential investment, which we believe leads to more context for well-rounded decisions and better outcomes.

Our dedicated Responsible Investing (RI) team assesses the environmental and social profiles of individual fixed income securities and portfolios. The team applies the Responsible Investing Indicator Model (RIIM), our proprietary tool for screening environmental, social, and ethics factors. The RIIM flags any elevated RI risks with an investment and can serve to identify investments with positive RI characteristics and manage RI factor exposures at the portfolio level. The RIIM processes data from T. Rowe Price systems, company reports, nongovernmental organizations, and select third-party vendors to assess the responsible investing profiles of more than 14,000 corporate and sovereign entities, globally.