Active Fixed Income
Redeploy cash as rates begin to drop
Bonds have historically outperformed cash in falling rate environments.1
Navigate the current fixed income environment with Victory Income Investors
Despite the perceived protection from volatility, fleeing to cash or keeping too much cash on the sidelines may produce lower returns versus maintaining a diversified portfolio over the long term.
- Consider the risks of not being invested when the markets start to recover. Investors with too much cash on the sidelines could be putting long-term goals at risk.
- Over the long term, cash has not historically kept up with inflation, while bonds have delivered returns that exceeded the rate of inflation.2
- Bonds have historically outperformed cash in falling rate environments.1
Victory Income Investors has been managing fixed income portfolios for over 50 years and has built a framework designed to help investors determine the best way to invest in fixed income for their goals.
Get your fixed income portfolio construction guide
Victory Income Investors' framework for building fixed income portfolios
All portfolios should be well-diversified. A well-diversified fixed income portfolio could help investors achieve their capital preservation, income generation and/or additional diversification goals.
It all depends on your fixed income framework. For example, start with a diversifier, like a core or core-plus product, and then align to your goals and risk tolerance.
Consider these potential fixed income portfolio building blocks.
Start with a diversified product
This could be an intermediate core or core plus product depending on risk tolerance. Core holdings typically provide diversification to equities.
Consider a capital preserver
Adding a capital preserver, such as a short-term bond fund, can lower overall portfolio duration and fine-tune the portfolio to potentially mitigate interest rate risk.
Customize to investor objectives
Adding additional fixed income products can then be used to seek specific objectives. The above portfolio prioritizes yield and/or income with an income generator.
Incorporate market expectations
Portfolio construction can also account for expected changes in rates, which will vary based on the direction and magnitude of rate movements. The above portfolio is positioned with the expectation that rates will rise.
Customize a fixed income portfolio for your goals
Now that you have an idea of a possible framework for building a fixed income portfolio, you can start customizing based on your own goals and priorities. Select a priority below to learn more.
Diversification: Fixed Income portfolios built to prioritize diversification tend to include a varied exposure to credit risk, interest rate risk, and fixed income asset classes. Investors looking for a balanced approach could start here.
Income: Starting yields are indicative of potential future returns, so if your goal is to maximize the income your fixed income portfolio can offer, it may be beneficial to build your portfolio around yield. Introducing products like high-yield corporate bonds or investment grade corporate bonds to supplement your core holdings, can increase return potential but does invite additional credit and/or interest rate risk. Here’s an example:
Capital Preservation: Portfolios built with the goal of principal preservation and loss prevention tend to operate on shorter time horizons and have lower interest rate risk. Starting with a diversified core product and customizing with short-term products with lower interest rate risk may help investors preserve hard-earned capital.
Diversification: Fixed Income portfolios built to prioritize diversification tend to include a varied exposure to credit risk, interest rate risk, and fixed income asset classes. Investors looking for a balanced approach could start here.
Income: Starting yields are indicative of potential future returns, so if your goal is to maximize the income your fixed income portfolio can offer, it may be beneficial to build your portfolio around yield. Introducing products like high-yield corporate bonds or investment grade corporate bonds to supplement your core holdings, can increase return potential but does invite additional credit and/or interest rate risk. Here’s an example:
Capital Preservation: Portfolios built with the goal of principal preservation and loss prevention tend to operate on shorter time horizons and have lower interest rate risk. Starting with a diversified core product and customizing with short-term products with lower interest rate risk may help investors preserve hard-earned capital.
For illustrative purposes only; not a recommendation of any specific security or investment strategy.
Featured products
UISBX
Victory Short-Term Bond Fund
Based on risk-adjusted returns for the period ended 3/31/25, out of 529 funds in the Short-Term Bond Category.
USSBX
Victory Short-Term Bond Fund
Based on risk-adjusted returns for the period ended 3/31/25, out of 529 funds in the Short-Term Bond Category.
USTB
VictoryShares Short-Term Bond ETF
Based on risk-adjusted returns for the period ended 3/31/25, out of 529 funds in the Short-Term Bond Category.
UIITX
Victory Core Plus Intermediate Bond Fund
Based on risk-adjusted returns for the period ended 3/31/25, out of 530 funds in the Intermediate Core-Plus Bond Category.
USIBX
Victory Core Plus Intermediate Bond Fund
Based on risk-adjusted returns for the period ended 3/31/25, out of 530 funds in the Intermediate Core-Plus Bond Category.
UITB
VictoryShares Core Intermediate Bond ETF
Based on risk-adjusted returns for the period ended 3/31/25, out of 422 funds in the Intermediate Core Bond Category.
We construct portfolios using our core competencies in evaluating, taking and managing credit risk with the goal of producing above-market returns over the three- to five-year period.
Time-tested process: We focus on fundamental research and relative value
- Our investment process is consistent, repeatable and incorporates a customized risk management system that limits concentration and liquidity risks.
- Our research and ratings process is proprietary and independent. Historically, more than half of our credit ratings are different from those of nationally recognized statistical rating organizations (NRSROs).
Strategic flexibility: We seize market opportunities that might elude larger managers
- Our scale and agility allow us to capitalize on investment ideas that others might overlook or struggle to implement due to size or expertise.
- We size our positions and allocate across asset classes based on our own independent view, not index weightings.
Experienced active manager: We’ve managed fixed income for more than 50 years
- Long-standing track record managing across fixed income asset classes through more than a half-century of economic cycles.
- Only two fixed income managers in the leading institutional database1 have a longer track record2 than Victory Income Investors.
1eVestment database. 2Track record in the US Core Plus space
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