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Dreyfus Launches Program to Help Investors and Advisors Navigate Risks of Challenging Fixed Income Market Highlights Critical Factors to Consider When Investing in Non-Traditional Fixed Income Solutions 

As investor interest grows in non-traditional fixed income, Dreyfus, a BNY Mellon company, has launched an integrated program designed to help educate investors and their financial advisors about the risks and opportunities for investing in a changing fixed income environment.

"The prospect of rising interest rates, bond market liquidity challenges and shifting monetary policy pose significant risks for fixed income investing," said Kim Mustin, Head of North American Distribution for BNY Mellon Investment Management.  "While investors are embracing non-traditional fixed income strategies in response to these challenges, they may be trading one set of risks for another.  We've designed an education platform to help investors and their advisors ask the right questions to make informed decisions for their fixed income portfolios."

Encouraging investors to "know what you own" in fixed income portfolios, Dreyfus has launched, a new website that focuses on three pillars when considering non-traditional fixed income funds: 

  1. Is the fund able to take a high conviction position on small bond issues?
  2. Are the drivers of fund performance transparent and clear?
  3. Is the fund flexible enough to pursue positive returns regardless of the rate environment?

" is designed to serve as a central source for investors and their advisors to discover, learn and explore what we believe investors need to know about non-traditional fixed income strategies," Mustin said.  The microsite includes an introduction to Dreyfus Opportunistic Fixed Income Fund, investment insight materials for that fund, a video from Standish Opportunistic Fixed Income Portfolio Managers, and an opportunity to subscribe for future updates.    

White Paper - Know What You Own in Your Unconstrained Bond Portfolio

The site also features a white paper entitled "New Bond Investing for New Times – Execution Matters in Opportunistic Fixed Income Strategies," which underscores the importance for investors to understand the 'what' and the 'how' of these strategies so that investors avoid potentially trading one kind of risk for another. 

Beyond a certain size threshold, it becomes more difficult to transact in cash bond markets, according to the paper. Larger funds may need to gain exposure to certain parts of the market through derivative contracts, introducing special counterparty and liquidity risks that must be managed.  While Dreyfus believes that derivatives can be useful tools for managing interest rate changes and other kinds of portfolio risk, the paper explains why it is important for investors to understand exactly how they are used within an unconstrained portfolio.

"We believe that a smaller asset base could provide for capturing more meaningful, high conviction exposures in an opportunistic fixed income bond fund," said David Leduc, Chief Investment Officer at Standish Mellon Asset Management Company LLC, the Boston-based fixed income specialist for BNY Mellon, and a portfolio manager of Dreyfus Opportunistic Fixed Income Fund.  "We also believe that our bond-by-bond implementation of Standish's 'best ideas' across 50-150 issuers from all sectors and regions of the fixed income markets is easier for investors to understand what drives the risks and returns in their opportunistic fixed income portfolio."

The paper concludes that individual security selection will likely be even more important than intelligent sector rotation within the unconstrained bond asset class.