Optimize Bond Strategies for Today’s Rate Environment | American Funds

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Featuring

Mike Gitlin Head of Fixed Income 23 years of experience in investment industry
investment perspectives

Optimize Bond Strategies for Today’s Rate Environment

Listen and learn:

  • Why it’s important for “bond funds to act like bond funds.” 
  • How unconstrained bond funds reaching for yield expose investors to undue risk.
  • Ways to position client portfolios for the Post-Post Crisis Period.

Bond portfolios for most clients should strive for four main goals: capital preservation, income, inflation protection and diversification from equity volatility. But many fixed income portfolios are straying from these objectives, which means “the end client may end up with an outcome they hadn’t expected,” says Mike Gitlin, Capital Group’s head of fixed income.

The solution? An overall fixed income strategy that aims to build “bond funds that act like bond funds,” Gitlin explains. Bond funds — despite the temptation to reach for higher yields amid the low interest rate environment — need to “have a prudent amount of risk management in addition to aiming for a
prudent amount of excess return,” Gitlin says.

Protecting clients from volatile periods will be increasingly important as the economy is “late in the cycle” and likely to continue to generate modest growth for years. The current Post-Post Crisis period — following the Financial Crisis of 2008 and 2009 and the Post-Crisis bounceback that ended in November 2014 — is one where clients should keep portfolios balanced and take prudent risk despite the temptation to reach for yield.

Generate growth with your equity portfolio, but “be prudent with your risk-taking with fixed income,” Gitlin says.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Content contained herein is not intended to serve as impartial investment or fiduciary advice. The content has been developed by Capital Group, which receives fees for managing, distributing and/or servicing its investments.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.