The growth of passive investing is widely discussed by equity market investors, but less so in fixed income. This is because there are a number of differences between equity and bond indices that need to be taken into consideration when analysing the active versus passive debate, which we believe supports the case for active management.
Since Donald Trump’s election as President of the United States in November last year, both interest rates and inflation have been trending upwards. Recently, the US Federal Reserve (Fed) raised rates by a further 0.25%, whilst in the UK inflation came in at a higher-than-expected 2.9%. Typically, this environment is deemed to be detrimental to fixed income investors. However, we believe that a global, active approach can negate much of this risk.