The first paper looks in detail at the future of fixed interest investing, assessing how investors can capitalise on the low risk of investing in this asset class and maximise return without having to resort to indexed investing or cash.

The research paper, which was created for institutional investors, considers strategies for investing in fixed interest that do not focus solely on the standard benchmark.

Omega Global Investors Director of Investments and Co Founder, Mathew McCrum, said that many institutional investors have discarded fixed interest as an attractive asset class because it has failed to deliver on its promise of low risk for good returns.

"This market environment has changed the shape of investing across a number of asset classes, especially fixed interest which was previously seen as low risk but offering better returns than cash," Mr McCrum said.

"Changes in this asset class have made it necessary to look at investing in fixed interest securities, and the risk and return this provides, in a different way.

"Essentially the value of the fixed interest benchmark has dropped, with investors exposed to the benchmark having more exposure to lower quality credit and less exposure to interest rates.

"This has caused institutions to slowly reduce their bond holdings during the past six years, replacing the exposure with the safe haven of cash."

Further to this, Mr McCrum's research points out that more change is to come during the next two years, with 30 per cent of the fixed interest benchmark maturing.

This, and the difficulties of issuing new corporate debt in the current environment, means the amount of government debt and the duration of the benchmark portfolio will change considerably.

Mr McCrum said that with benchmarks distorting the value of the asset class, investors should consider an approach that does not rely on that indicator as a measure of success.

"The factors affecting the fixed interest benchmark are out of investors' control, which means that they can't make informed investment decisions if using the benchmark as an indicator of success," Mr McCrum said.

"The research considers the asset class in a different way.

"A truly low risk defensive portfolio, that protects downside while still capturing the upside potential, can be built without relying on benchmarks.  

"Institutions can use a robust and intelligent portfolio construction methodology instead, which targets a low risk level through focusing on highly liquid, investment grade securities in a diversified portfolio.

"This methodology also has an unconstrained investment universe free from benchmarks, allowing investors to access better sources of market return."

The research paper aims to encourage institutions to consider that the underperformance of benchmarks does not mean fixed interest has nothing to offer, especially over the lower potential return of cash holdings as interest rates fall.     

"A defensive portfolio of fixed interest securities with high average credit ratings, investing into organisations in sound financial health, can still deliver attractive returns for investors," Mr McCrum said.

For more information or a copy of the research, you can speak to Mathew McCrum on 03 8689 9580 or email him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it