Multi-Asset Credit: Increase Your Alpha Potential Through Security Selection


Multi-Asset Credit: Increase Your Alpha Potential Through Security Selection

Relative value alpha opportunities remain limited and are likely to increase as correlations start to decouple. By encompassing a broad spectrum of instruments to diversify returns and manage risk, a multi-asset credit (MAC) allocation offers opportunities to capture alpha, even under conditions that favor a defensive orientation. 

Of course, asset classes don’t exist in isolation. To optimize outcomes, investors should consider how their investments and risks are changing in a larger context in order to take advantage of opportunities across both asset classes and geographies. For instance, MAC managers who are solely focused on domestic markets are unable to take advantage of global market opportunities in both developed and emerging markets.

When implementing a MAC allocation, investors should also evaluate their potential for exposure to concentration risk. For example, some credit issuers operate in different asset classes. An investor who uses different managers for different credit areas might not see the areas of overlap across their portfolios. An effective MAC approach manages that risk because it operates with an awareness of the entire portfolio.  Therefore, we believe investors should consider employing a dedicated manager with demonstrated experience in MAC rather than relying on a different manager for each type of credit asset. 

Size is another factor. A declining liquidity environment favors MAC allocations appropriately sized to take advantage of value dislocations. Large portfolio managers may find it difficult to maneuver sufficiently or add security selection alpha. So investors need to evaluate how nimble MAC managers are and how well they execute their strategies. 

MAC aims to maximize returns by identifying tactical opportunities during periods of market dislocations. Risk mitigation comes from MAC managers’ strategic view of a given economic and credit cycle and their comfort with structuring investments to create downside protection. For this approach to be effective, bottom-up security selection is key, which means it’s crucial for managers to be have knowledge across asset classes and geographical areas. Being part of a global credit platform with analysts who track industries and companies across credit cycles can facilitate this approach. MAC managers also require resources and expertise to perform due diligence – going beyond traditional credit analysis – to identify and verify the broadest range of global alpha sources. 

At PineBridge, we have globally integrated fixed income teams capable of both bottom-up analysis and top-down views. We also have demonstrated experience in identifying investments within a multi-asset credit approach. When managing MAC portfolios, we apply continuous portfolio monitoring and rigorous risk management to each of our strategies and leverage our long-standing asset allocation process. 


Investing involves risk, including possible loss of principal. The information presented herein is for illustrative purposes only and should not be considered reflective of any particular security, strategy, or investment product. It represents a general assessment of the markets at a specific time and is not a guarantee of future performance results or market movement. This material does not constitute investment, financial, legal, tax, or other advice; investment research or a product of any research department; an offer to sell, or the solicitation of an offer to purchase any security or interest in a fund; or a recommendation for any investment product or strategy. PineBridge Investments is not soliciting or recommending any action based on information in this document. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author, may differ from the views or opinions expressed by other areas of PineBridge Investments, and are only for general informational purposes as of the date indicated. Views may be based on third-party data that has not been independently verified. PineBridge Investments does not approve of or endorse any re-publication or sharing of this material. You are solely responsible for deciding whether any investment product or strategy is appropriate for you based upon your investment goals, financial situation and tolerance for risk.

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