Perhaps you’ve heard: inflation seems to have an insatiable appetite and the short term outlook in fixed income are being dominated by interest rates spikes by the central bank, according to ssga.com.

Ah, but there is a life preserver: longer term, structural factors are having more than a little sway in how  investors implement and oversee fixed income allocations.

'Did someone say life preserver’, grumbled the Skip from Gilligan’s Island?

‘Fraid so, dude.

And you want to know the punch that ETFs are packing in in the evolving landscape of fixed income? Well, consider ssga’s new global study, which surveyed 700 institutional investors and investment decision makers.

One key finding: there was a growth from assets under management from $574 billion in 2017 to $1.28 trillion in 2021, according to data recorded by the New York Stock Exchange. What’s more, the number of funds also accelerated like no one’s business over the same period – from 278 to almost 500.

As for non core sectors? The role of ETFs in asset allocation is propelling, according to its survey this year.

According to the report, 62% of investors who are ratcheting up their exposure to high yield corporate credit over the next 12 months indicated the chances are high they’ll leverage ETFs to do it. Ditto for 53% in terms of emerging market debt, according to pionline.com.

"Our 2022 survey shows that the role of ETFs in asset allocation is expanding to non-core sectors," said the report, "The Role of ETFs in a New Fixed Income Landscape." 

Try active fixed management, which has an eye on managing the different risk characteristics of the fixed income market, according to madisoninvestments.com.

When these risks bubble to the top, the price tag on a bond might go kerplunk, potentially jeopardizing  interest payments down the line. The upshot: your portfolio could take a hit. Yeah; ouch. Meantime, common as they are, passive buy and hold strategies – or ETFs – have a history of missing the mark on addressing risks linked with fixed income.

On the radar of active fixed management is managing the various risk characteristics of the fixed income market. A portfolio can act in light of market conditions with active decision making within a portfolio.

Okay, so if you’re searching high and low for white knuckle thrills, fixed income investing might not be the Uber pickup you’re looking for. 

But…Isn’t there always one? The market volatility sparked by the aftermath of the COVID pandemic, bond specialists might want to hold on tight, according to benefitscanada.com.

“There’s more yield in the marketplace, so bonds are becoming a better competitor to stocks. . . . You should be asking yourself, how do I get more to my portfolio’s core allocation?” said Jeffrey Moore, portfolio manager in the fixed income division at Fidelity Investments, during the Canadian Investment Review‘s 2022 Risk Management Conference, the site continued. “I think there’s a whole bunch of ways.”

They’re watching

Meaning mediablog.com, which reported a few ways it picked up on the radar on companies tweaking their ESG messaging in various publicity pieces this month. 

There’s a focus on the “E” in ESG; namely, increasingly, Americans are fretting over and more engaged with global warming

The “S”? No less important, especially if you have a soft spot for “great” community outreach programs and the money set aside toward it. 

Meantime, 94% of people didn’t believe enough had been done to advance the cause of sustainability and social issues, according to a recent global study from Oracle.

Now, in the landscape of success breeds success, the second edition of the “ESG and Green Finance Opportunities Forum” by The Chamber of Hong Kong Listed Companies will take place on Oct.  27, according to finance.yahoo.com.

That comes in the aftermath of last year’s inaugural event. The theme for this year’s is Navigating Climate Risk and Financing Climate Actions.

Confirmed to deliver the opening address is Financial Secretary Paul Chan Mo-po. A luncheon speech will be given by Secretary for Environment and Ecology Tse Chin-wan. 

A form reviewer at the Securities and Exchange Commission recently said he wants to make sure life insurers give investors a clear picture of how their registered index-linked annuity (RILA) contracts work. RILAs are annuity contracts that can expose the holder to the risk of investment-related loss of principal, but that tie crediting rates at least partly to the performance of investment indexes, rather than to the performance of funds that resemble mutual funds. At the Life Insurance Products Conference, held recently in Washington, D.C., Michael Kosoff, an attorney on the staff of the SEC’s Division of Investment Management, stated that he wants one strategy to be available throughout the life of the contract. He also wants to require issuers to disclose maximum losses. Essentially, the SEC wants life insurance company clients to say which crediting strategy the clients' guarantee will be available for the life of a RILA contract. A crediting strategy includes a reference to a particular index such as the S&P 500. Kosoff’s concern is that many issuers have a provision stating, “After the first year, we can terminate any and all options currently available. So, in essence, after year one, investors have no idea what they’re getting.”

Finsum:Due toconcerns over changing crediting changes in registered index-linked annuities, an SEC form reviewer stated that he wants one strategy to be available throughout the life of the contract.

According to a Bloomberg News survey of terminal and Bloomberg.com readers, sixty-five percent of the respondents expect ESG funds to trail the broader market in 2023. Out of the 691 survey respondents, 264 expect ESG funds to “slightly underperform,” while 184 are predicting they’ll “significantly underperform.” Of those 691 respondents, 235 identified themselves as being directly involved in ESG investing, and of this group, a little more than half said they expect the funds to “slightly” or “significantly” underperform. Fionna Ross of Edinburgh-based fund manager Abrdn Plc told Bloomberg, “Given the challenges of 2022, there will be some recovery next year, but it will remain mixed” because of inflation and other overhanging economic hurdles." While data shows that the average equity fund adhering to ESG factors lost slightly less money this year than products that track traditional broader market indexes such as the S&P 500, ESG funds have outperformed over a longer period. According to researchers at Morningstar, about 56% of U.S. sustainable funds beat rival category groups in the three-year period that ended on Sept. 30th.

Finsum:Based on the results of a recent Bloomberg survey, 65% of respondents believe that ESG funds will underperform the broader market in 2023.