Core Fixed Income
The foundational bond allocation in an institutional portfolio — typically high-quality investment grade bonds including US Treasuries, agency bonds, and investment grade corporate bonds.
The primary purpose is capital preservation, income generation, and portfolio stability rather than return maximization. For pension funds specifically, core fixed income often serves a liability matching function — the duration and cash flows are structured to align with the timing of future benefit payments.
Typical characteristics include investment grade only (BBB- or higher), low credit risk, relatively liquid holdings, negative correlation to equities in stress environments, and duration typically in the 5-10 year range for most allocators.
Frequently Asked Questions
What is core fixed income?
Core fixed income is the foundational bond allocation in an institutional portfolio — high-quality investment grade bonds (US Treasuries, agency bonds, investment grade corporates) focused on capital preservation and income generation.
What role does core fixed income play in a portfolio?
Core fixed income provides stability, income, and diversification. In pension funds, it serves a liability matching function — structuring cash flows to align with future benefit payment obligations.
What is the typical duration of core fixed income?
Most institutional allocators target 5-10 year duration for core fixed income, balancing income generation with interest rate sensitivity.
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