Value Investing Amid a Turbulent Fixed Income Climate

Amid an uncertain fixed income environment, Harris Associates' Adam Abbas reiterates how the value approach steers their bond investing.

Despite concerns about the current investment landscape and anxiety over short-term market variables, long-term value investing opportunities exist for fixed income assets just as they do for equities. Harris Associates Portfolio Manager and Co-Head of Fixed Income Adam Abbas explains the benefits of adhering to value investing principles.
  • Investors focused on short-term market activity may overlook the safety we usually equate with fixed income assets, given the unique margin of safety and built- in cushion that can be gained from higher yields.
  • The value proposition in fixed income lies in determining an asset’s genuine value and acquiring it for less than its true worth. This requires a consistent approach, especially amid short-term price swings resulting from temporary factors.
  • Given the Federal Reserve’s unwavering commitment to fight inflation, a significant reduction in policy rates seems inevitable over the medium term. Investors focused on the bigger picture may benefit from top-tier fixed income assets.
  • The value in bonds emanates from more than simply potential price returns, but income itself is an indispensable part of the value proposition for fixed income assets.
  • By getting past the short-term noise of rising rates and inflation concerns, and viewing fixed income through a value investing lens, you can uncover unique opportunities. Given the past two years’ rate increases, the Harris fixed income team finds leveraged loans could be particularly attractive.
The information, data, analyses, and opinions presented herein (including current investment themes, the portfolio managers’ research and investment process, and portfolio characteristics) are for informational purposes only and represent the investments and views of the portfolio managers and Harris Associates L.P. as of October 2023 and are subject to change and may change based on market and other conditions and without notice. This content is not a recommendation of or an offer to buy or sell a security and is not warranted to be correct, complete or accurate.

There can be no assurance that developments will transpire as forecasted. Actual results may vary.

Investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

Natixis Distribution, LLC (Member FINRA|SIPC) is a marketing agent for the Oakmark Funds, a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers.