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Active Fixed Income

Diversified strategies designed to generate excess returns and a consistent source of yield.

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Principles of Investing

Focus on Consistency – Avoid Large Concentrated Bets

When the bond markets experience turmoil the top performing managers have historically taken a hard hit likely due to large bets across various sectors or duration. Diversifying your sources of return may be critical to providing more consistent outcomes.

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Percent of Top Quartile Managers That Declined in Peer Rank After a Credit Event in the Market

Source: eVestment, FRED, Northern Trust Asset Management. Data from January 1, 1993 to June 30, 2023. Credit events are defined as quarters where the absolute % change in 10-Year Treasure yield is greater than the average +1 standard deviation. A decline in peer rank is defined as a decline in the trailing 1-year return peer rank from the quarter end before the credit event to the quarter end of the credit event. The analysis was conducted using the eVestment U.S. Core Fixed Income Universe. Historical trends are not predictive of future results.

Principles of Investing

We Favor Bonds That Increase Risk-Adjusted Returns

Bonds at the lower-end of the investment grade universe have historically offered higher risk-adjusted returns with minimal added default risk.

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Sharpe Ratio by U.S. Credit Quality (last 20 years)

Source: Northern Trust Asset Management, Morningstar Direct, S&P Global. Sharpe ratio data as of June 30, 2023. Market indices are used for the Sharpe ratio calculations: ICE Bofa AAA US Corporate TR represents AAA, ICE Bofa AA US Corporate represents AA, ICE Bofa A US Corporate TR represents A, and ICE Bofa BBB US Corporate TR represents BBB. Average default rates from S&P Global, Default, Transition, and Recovery: 2022 Annual U.S. Corporate Default and Rating Transition Study. A security rating is not a recommendation to buy, sell or hold securities. The rating may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of the other ratings.

Principles of Investing

Protect Against Defaults to Deliver Consistent Outcomes in Any Market

The risk-reward tradeoff between yield and risk needs to be consistently assessed and monitored, as the impact of even 1 – 2% in defaults can quickly erode any previous short-term yield gains.

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High Yield 3-Year Rolling Returns vs. Default Rate Since 1989

Source: eVestment, Northern Trust Asset Management. Data as of June 30, 2023. High yield is represented by Bloomberg US Corporate High Yield Index. Past performance is not indicative or a guarantee of future results. Index performance returns do not reflect any management fees, transaction costs or expenses. it is not possible to invest directly in any index. Indexes are the property of their respective owners, all rights reserved.

Principles of Investing

Favor Diversification Over Concentration

Portfolio concentration can add idiosyncratic risk that we systematically avoid by effective diversification that involves setting individual security weight constraints, diversifying by maturity, industry, sectors, countries and currencies.

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10 Year Median Peer Group Ranking — eVestment U.S. Core Universe

More Diversifed Strategies is defined as strategies that rank in top 50% of peer group universe for total number of holdings, Less Diversified Strategies are those that appear in the bottom 50% of the universe. Historical trends are not predictive of future results. Source: eVestment, Northern Trust Asset Management. Data as of June 30, 2023.

Principles of Investing

Avoid Speculative Derivative Bets That Increase Risk

We purposefully avoid esoteric securities and short-term speculative positions that can be costly during times of stress in order to avoid unintended outcomes that may occur with the increased complexity and risk.

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Median Manager Peer Group Ranking Return During 20% Market Corrections (eVestment U.S. Core Universe)

The use of derivatives was determined by a field in eVestment that asks if the manager uses derivatives in the management of the product. Historical trends are not predictive of future results. Source: eVestment, Northern Trust Asset Management. Data as of June 30, 2023.


We purposely construct portfolios that seek to generate excess returns by incorporating our high conviction interest rate and credit strategy views so that we can ultimately deliver more consistent outcomes to our clients while mitigating risk.

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    Diversification does not guarantee a profit or protect against a loss in a declining market.  It is a method used to help manage investment risk.

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    Interested in learning more about our investment strategies? 

    The information contained herein is intended for use with current or prospective clients of Northern Trust Investments, Inc (NTI) or its affiliates. The information is not intended for distribution or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. Northern Trust Asset Management’s (NTAM)  and its affiliates may have positions in and may effect transactions in the markets, contracts and related investments different than described in this information. This information is obtained from sources believed to be reliable, its accuracy and completeness are not guaranteed, and is subject to change. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor.


    This report is provided for informational purposes only and is not intended to be, and should not be construed as, an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice. Recipients should not rely upon this information as a substitute for obtaining specific legal or tax advice from their own professional legal or tax advisors. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. Indices and trademarks are the property of their respective owners. Information is subject to change based on market or other conditions.


    All securities investing and trading activities risk the loss of capital. Each portfolio is subject to substantial risks including market risks, strategy risks, advisor risk, and risks with respect to its investment in other structures. There can be no assurance that any portfolio investment objectives will be achieved, or that any investment will achieve profits or avoid incurring substantial losses. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Risk controls and models do not promise any level of performance or guarantee against loss of principal. Any discussion of risk management is intended to describe NTAM’s efforts to monitor and manage risk but does not imply low risk.


    Environmental, Social and Governance (ESG) investing involves certain risks because the methodology of an underlying index selects and assigns weights to securities of issuers for nonfinancial reasons, a strategy may underperform the broader equity market or other strategies that do not utilize ESG criteria when selecting investments. The companies selected by an index provider as demonstrating ESG characteristics may not be the same companies selected by other index providers that use similar ESG screens. In addition, companies selected by an index provider may not exhibit positive or favorable ESG characteristics. Regulatory changes or interpretations regarding the definitions and/or use of ESG criteria could have a material adverse effect on a strategy’s ability to invest in accordance with its investment policies and/or achieve its investment objective. 


    Past performance is not a guarantee of future results.
    Performance returns and the principal value of an investment will fluctuate. Performance returns contained herein are subject to revision by NTAM. Comparative indices shown are provided as an indication of the performance of a particular segment of the capital markets and/or alternative strategies in general. Index performance returns do not reflect any management fees, transaction costs or expenses. It is not possible to invest directly in any index. Net performance returns are reduced by investment management fees and other expenses relating to the management of the account. Gross performance returns contained herein include reinvestment of dividends and other earnings, transaction costs, and all fees and expenses other than investment management fees, unless indicated otherwise. For additional information on fees, please refer to Part 2a of the Form ADV or consult an NTI representative.


    Forward-looking statements and assumptions are NTAM’s current estimates or expectations of future events or future results based upon proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve.  Actual results could differ materially from the results indicated by this information.


    Not FDIC insured | May lose value | No bank guarantee

    Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Northern Trust Asset Management Australia Pty Ltd, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.