The Sixth "P" of Presentations: Positioning Fixed Income Strategies in 2025
Fixed income is at its most attractive valuations in a generation and clients are in need of diversifying assets in a time of elevated volatility. Is your firm prepared to effectively position your strategies and play a bigger role with clients or are you relying on the same toolkit you developed ten years ago?
When allocators think of fixed income the first attribute that often comes to mind is, ‘risk diversifier’. Until recently, that was often the end of the discussion as the income in fixed income has been hiding. But, with many parts of the bond market offering yields of 4, 5 or 6% (or more!) and in an environment where volatility is the predominant theme, institutions are taking a closer look at fixed income – today’s fixed income – to see what it can do for them. Is your firm part of that discussion?
As markets and investors’ portfolios have gotten more complex, the term, ‘diversification’, has taken on new meaning as well. Managing portfolio risk extends well past the concept of bonds doing well when stocks take a beating and has moved into the liquidity diversifying benefits of high yield alongside private credit, fixed income manager style (or size) diversification in pursuit of higher – and more stable – return outcomes and credit risk diversification gained through an EMD allocation complimenting US investment grade corporates bonds.
For bond managers, the good news is that there is a meaningful opportunity to build your business. The challenge is that the competitive landscape includes not just the managers within your competitive sphere, but managers that may introduce similar diversifying benefits provided through very different means. Put differently, in today’s market a high yield strategy competes not just with other high yield strategies, but with investment grade credit, multi asset credit, emerging markets debt, structured credit, private credit and any number of other strategies that can offer their own form of diversification. Correspondingly, your story needs to incorporate not just the five P’s (philosophy, people, performance, process and portfolio) but also a sixth: positioning.
The five original P’s are generally more inward- than outward-looking: they guide you in telling the story behind your strategy: conveying the core set of beliefs shared by a group of investors working together and following a common methodology to construct a portfolio that will lead to a desired set of outcomes. Presented effectively, they give clients much needed transparency into the ‘why’, ‘who’ and ‘how’ decisions are made along with the ‘what’ will happen in different environments.
Positioning is more externally oriented and will help clients understand how your strategy fits, adds value and plays nicely within their portfolio. This takes a traditional peer-relative perspective and broadens it based on client context. I always think of fixed income as a ‘problem solving’ asset class. Positioning in this context considers the types of challenges clients may be contending with in their portfolio and brings out attributes of a given strategy that can help address those challenges. Tailoring the message to the situations of clients in distinct channels increases its effectiveness in a scalable manner.
In their April 2025 article titled, “Becoming Radically Leaner”, Boston Consulting Group suggests that firms in the investment management industry are best served committing to (and investing accordingly) one of three paths:
Alpha Shops, representing a fairly small slice of managers that stand out for their ability to generate returns through active trading strategies and where their biggest return on investment comes from continued investment in those capabilities.
Beta Factories where IT investments to reduce costs and continue driving down fees will benefit them.
Distribution Powerhouses & Solutions Providers (filling the wide gap between the Alpha Shops and the Beta Factories) where investments in sales and marketing will strengthen client engagement and service delivery.[1]
This market condition only adds to the opportunity for most active fixed income managers created by the highest yield levels since before the GFC. Those managers that make the effort to develop a compelling story behind their strategy and to position that strategy with today’s client portfolios in mind will be the winners. How ready is your firm?
[1] Dean Frankle, Renaud Fages, Johannes Burkhardt, Peter Czerepak, et al, “Becoming Radically Leaner” (Global Asset Management Report 2025), Boston Consulting Group, April 29, 2025, https://www.bcg.com/publications/2025/becoming-radically-leaner-to-boost-resilience
