Fixed Income Fund
BondIT is the innovative asset management software that constructs optimized fixed income fund investment portfolios in a matter of minutes. Completely customizable, your business can tailor our asset management platform to conform to your business workflows, generating automated investment proposals which are optimized and compliant immediately. Integrate BondIT seamlessly with any enterprise system and choose to work with the standard fixed income analytics or work closely with our team to create bespoke features designed for your business workflows.
What is a fixed income fund?
A fixed income fund is a type of investment portfolio typically used for investments in municipal bonds and corporate bonds. It’s the role of the portfolio manager and the advisor to assist investors with their choice of fixed income fund, responding to changing market conditions to optimize investment portfolios to ensure the best possible return on investment for their clients. BondIT is the asset management tool that takes the guesswork out of fixed income portfolio management. We have designed a portfolio optimization platform using leading data science and the latest in software development methodologies. Where it would previously take a team of analysts to accurately respond to changing market conditions and select which corporate bonds to buy, BondIT returns compliant investment proposals in a matter of minutes. This means that client managers can spend more time with their clients and portfolio managers can spend more time responding to the market.
Fixed income investments are typically used to preserve investment capital as much as possible, generating sustainable income sources with less of the risk that comes with investing in stocks. It is generally understood that fixed income funds are less sensitive to fluctuations like economic downturns and geopolitical events and it is for this reason that they are considered less of a risk than other more volatile money markets. Fixed income risk is still present when you choose to invest in bond funds, and it comes in a variety of ways depending on the type of fixed income instruments an investor has included in their investment portfolio. Portfolio optimization is what service advisors and portfolio managers offer their investment clients, helping them to choose the best possible investments which align with their clients’ investment objectives. BondIT is capable of generating investment proposals tailored to individual bonds and individual client needs.
When it comes to the types of fixed income securities available to investors and how to rate bonds according to risk and investment return, the available fixed income options include government bonds and the corporate bonds market. Government bonds are usually the least risky investment opportunity. Treasury bonds, for example, are issued by the U.S. Treasury and are backed by the U.S. Government so the risk of default on these types of debt securities is extremely low. However, because they are so low risk they also return less to the investor. The yield of corporate bonds, on the other hand, is generally higher due to the higher levels of risk that comes with investing in private enterprise. Credit risk comes when corporate fixed income bonds have a low credit rating meaning they have a high chance of defaulting on interest payments and, possibly, of not being able to return to the bond amount at its maturity. Should a corporation become insolvent before the bond’s maturity, administrators will sell the company’s assets and distribute the funds amongst its creditors. This may not be enough to return the initial bond amount and the investor may lose both their regular interest payments (also known as coupon payments) as well as the investment capital.
Government bonds are less likely to default but they are subject to interest rate risk. Fixed income fund investing offers a high yield when interest rates are high. Investors which purchase debt securities issued by government organizations do so at a fixed rate of interest. However, if the federal reserve lowers interest rates throughout the term of the bond, the bond can be called early. In this instance, the initial investment is returned to investors and the bonds are issued again at a lower rate of interest. This means that an investor loses out on the original interest payments and must either settle for a lower interest rate or look for other investment opportunities. BondIT features a powerful ‘Solve Anyway’ option which is capable of returning investment proposals even when conditions seem infeasible.
As well as interest rate risk, municipal bonds are also subject to inflation risk. This occurs when the rate of inflation is higher over the term of the bond than the interest rate at the time of the bond’s issue. Essentially, income generated from this type of bond will be worth less than originally projected.
Corporate bonds are subject to more than just interest rate and inflation risk. Bonds issued by companies with a low credit rating are considered non-investment grade bonds or junk bonds. Junk bonds offer very high-interest payments due to the nature of their risk of default. While an investor may not be surprised to find that their junk bonds become useless when the company that issued them financially folds, in rare cases, they can in fact turn into angel bonds. Angel bonds are bonds issued by a company with a poor credit rating that increases over the term of the bond. Investors with this type of bond enjoy their regular high-interest payments as well as the return of their investment capital when the bond matures.
A diversified portfolio contains fixed income assets across a variety of investment opportunities, meticulously balanced to ensure that the investor’s objectives are met. Bond allocation may include a selection of both high risk and lower risk options, depending on a clients’ individual investment needs. BondIT delivers recently developed advanced laddering in an easy to navigate intuitive user interface.
Whether you’re building standard or custom ladders of municipal, corporate, and government bonds – as well as fully diversified broad-market portfolios – BondIT aligns optimal portfolio construction with client-specific needs. This marks a critical advancement in today’s planning-centric wealth management space. Pre-retirement liabilities such as a down-payment on a home or vacation property, children and grandchildren’s college tuition – the retirement nest egg itself – can now be custom-immunized in the advisor/client planning environment. Post-retirement, asset accumulation shifts to decumulation, and wealth management’s focus shifts to generating efficient income distribution throughout retirement. BondIT’s income ladder tool was designed with the flexibility to generate bond ladders and income streams in whatever frequency and the amount a client requires. This allows portfolio managers and advisors to more easily align investment opportunities with idiosyncratic gifting, philanthropic, or other requirements.
BondIT also provides benchmark relative portfolio and proposal construction and rebalancing workflows. In the same intuitive framework, BondIT allows for portfolio parameters and bond level constraints to all be based on benchmark relative inputs. Portfolios and proposals can also be compared across all analytic fields for enhanced client engagement.
To discover how BondIT can increase efficiency for your business, contact one of our consultants today. We’ll take you through exactly what BondIT offers businesses as well as the customizable options available and show you how we can tailor your fixed income fund management system to your business workflows.