To help investors better understand how fixed income works and its role in a portfolio, Tyndall AM has developed an information booklet “Bonding with Income – the truth about fixed income”.
The booklet, which will be available from financial advisers, will look at areas such as what types of investments fall into the fixed income category, including the different kinds of bonds, and explains common terminology such as yields and yield curves, coupons, duration and maturity.
Roger Bridges, head of fixed income at Tyndall AM, said that fixed income is an important component of a diversified portfolio but many investors find it a complex asset class to understand.
“We’re aware that many investors see fixed income as complicated and even intimidating, and the aim of the booklet is to provide a useful resource explaining the fundamentals of fixed income and helping investors understand the role it plays in their portfolio.
“For instance, we’re aware that many investors believe that term deposits are similar to fixed income in providing diversification to equities in a portfolio.
“However, studies show that term deposits returns have moved up and down in parallel with equities during four periods over the past 10 years, which means equities and term deposits are often highly correlated.
“Even when they are negatively correlated, term deposits tend not to offer the same levels of diversification to equities as fixed income,” he said.
The booklet also explains concepts such as price vs yield, the impact of the official cash rate on bonds, and the different kinds of risks associated with fixed income, such as credit risk, as well as the rewards.
“Fixed income provides many of the benefits that investors are currently seeking. For instance, a good quality fixed income managed fund should provide a regular known income stream, lower volatility, and better capital preservation than other asset classes such as equities.
“Furthermore, there’s much more to the asset class than just government or corporate bonds – active managers can invest in inflation-linked bonds and securitised assets,” Mr Bridges said.
Tyndall has made the booklet available through financial planners as it believes advisers are best placed to educate and inform investors.
Tyndall AM is a multi-specialist Australian investment manager, offering investment funds in Australian shares, Australian and international fixed interest, and alternative assets, as well as a multi-manager capability to retail and institutional investors in Australia. It has over A$22 billion in funds under management (as at 30 September 2012). It is a wholly owned subsidiary of Nikko Asset Management Co., Ltd., one of the largest asset managers headquartered in Asia with approximately A$148 billion in funds under management (as at 30 September 2012).
For more information please contact:
Roger Bridges – Phone: 8072 6350
29 October 2012