Fixed Income: Anchor | Capital Group

FIXED INCOME

Provide stability in down markets

Offer two funds to cover the waterfront

Circle graph for Fixed Income Anchor, depicting half of the circle as the Core Fund, and half as the Core plus fund. Circle graph for Fixed Income Anchor, depicting half of the circle as the Core Fund, and half as the Core plus fund.

 

We believe it's important to anchor the fixed income menu with a core and a core plus fund that can collectively support the four critical roles of fixed income.

Equity diversification

Capital preservation

Income

Inflation protection

Make sure your core fund provides real diversification

A core bond fund needs to provide balanced exposure to Treasuries, mortgages and investment-grade credit. Historically, broad U.S. bond market exposure has provided low correlation to equities, so it helps with diversification.
chart-correlation-bond-indexes-w-sp-500

 


Source: Morningstar. As of August 30, 2018. Indexes are, for investment-grade credit (Bloomberg Barclays U.S. Credit Index), high yield (ICE Bank of America Merrill Lynch U.S. High Yield Index), EM debt (J.P. Morgan Emerging Markets Bond Index Global), multi-asset (Morningstar Conservative Target Risk Index) and bank loan (S&P/LSTA Leveraged Loan Index).

The broad bond market has had negative equity correlation

Three-year correlation of bond indexes with S&P 500 Index

Avoid core bond funds that stretch for yield

Faced with a decade of low rates, many core funds have tilted toward credit to boost returns. As a result, these core funds have a higher correlation to equity and may not provide the stability participants want in a declining equity market.
 

Not all core bond funds provide the same diversification

10-year results of U.S. intermediate bond funds benchmarked to the broad bond index

 

Correlation with S&P 500

chart-core-bond-correlation
Ten-year return
 

Source: Morningstar. As of September 30, 2018. Funds were those in the Morningstar Intermediate-Term Bond category whose prospectus benchmark was Bloomberg Barclays U.S. Aggregate Index. Fund results are based on oldest share class.

Expand the opportunity set with core plus

A core plus fund provides higher total return potential through investments with greater credit exposure, like high yield and emerging markets debt. Before selecting a fund, understand a core plus manager’s risk management approach.

 

This article illustrates the number and type of funds that a plan might offer; it does not describe participants' asset allocations.

How we fit

The Bond Fund of America®
A core bond fund that behaves like one


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. 

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 should not be considered advice, an endorsement or a recommendation. 

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Past results are not predictive of results in future periods.