AB American Income Strategy
Balancing Income and Stability in Evolving Markets
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Finding investments that generate a high level of income while safeguarding capital is hard in the best of times. It’s even tougher in the current environment marked by high inflation, tight monetary policy and muted economic growth. Given the uncertain backdrop, it takes real expertise to find attractive sources of income while limiting downside risk.
Expert Analysis
With their love for the financial market, three Portfolio Managers share their investment journey after working in AllianceBernstein for more than 20 years. They have been adhering to the same belief. While building an effective solution for clients, they hope to achieve an investment objective that would deliver a high level of income with a focus on capital preservation. It allows them to deliver balance, diversification and income to clients over the course of the investment horizon.
How AB’s approach works
The barbell approach
We balance two major fixed-income risks—interest rate (duration) and credit—by seeking the best mix of US dollar bonds i.e., pairing high-yield corporate bonds and other credit assets with high-quality government debt in a barbell approach.
Dynamic Asset Allocation
Investment allocations are dynamically adjusted as market conditions change. This means using a disciplined investment process to actively manage the risk exposure between more stable high-quality bonds and higher-yielding return-seeking bonds.
Picking the Right Bonds
Choosing the right bonds requires intensive research. We look at individual issuers and issues to pick bonds that have the right mix of high income and stability.
Why AB American Income Strategy?
The AB American Income Strategy seeks to provide a high level of current income consistent with preservation of capital by investing in a diversified portfolio of US dollar-denominated bonds, including investment grade, high yield, non-investment grade bonds/fixed income securities within and outside of the US. The Strategy has stood the test of times over the past three decades, its proven track record attests to its success in evolving with the market and adapting to cyclical changes.
Income
The Strategy targets multiple sources of income. By pairing higher yielding credit with higher quality, more interest-rate sensitive securities, we aim to capture a steady stream of income with capital preservation.
Balance
A minimum 50% of the Strategy assets are invested in government and investment grade-rated (IG) bonds for stability*. The other half is invested in below IG securities such as high-yield corporate bonds and other credit assets to enhance income and dampen interest rate risks.
Diversification
Issuers are picked from a variety of sectors in a bid to search for the best opportunities. Under normal market conditions, at least 65% of assets must be in securities issued by US entities. Having a multi-sector exposure also ensures there is less risk of the potential damage that a large drawdown, or spike in default rates, might have in any single sector.
*IG bonds are considered less volatile and usually deliver a lower return than compared to US high yield bonds, which typically offer higher returns but with more risk.
See How AIP Balances Income and Stability in Evolving Markets
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Investment involves risks. Past performance is no guarantee of future results. This website has not been reviewed by the Securities and Futures Commission. The issuer of this website is AllianceBernstein Hong Kong Limited (聯博香港有限公司).