Opportunistic Bond Investing With CRDT: Less 'Fixed,' More 'Income'

2025-03-13 14:13:00 ET

Summary

• In contrast to many bond funds that maintain fairly static or fixed positions that mimic their benchmarks, CRDT aims to invest where there is value. In so doing, it seeks to generate income and return and can play a pivotal role as part of a well-diversified overall portfolio.
• CRDT employs a quantitative approach for monitoring relationships between sectors, issuers, and securities. The goal is to identify mispricings where payoff profiles are highly asymmetric.
• CRDT aims to exploit market inefficiencies in the valuation of complex and difficult-to-model securities.

Introduction

Investors in recent years may be justified in wondering whether their fixed income allocations are worthwhile. In contrast to the stout returns leading up to the pandemic, more recent results have seemed lackluster. Moreover, the diversification benefit ascribed to the classic 60/40 mix has been eroded by the recent rise in correlation with equities. The solution is embracing a strategy that is willing to go out-of-benchmark and across sectors within fixed income. The Simplify Opportunistic Income ETF ( CRDT ) takes exactly this type of highly active approach to fixed income investing. In contrast to many bond funds that maintain fairly static or fixed (pun intended) positions that mimic their benchmarks, CRDT aims to invest where there is value. In so doing, it seeks to generate income and return and can play a pivotal role as part of a well-diversified overall portfolio. Its value proposition is reflected in the solid performance numbers it has put up since its inception.

Truth in Advertising, Bond Fund Style

Bond funds tend to convey what investors should expect from them in two ways. The first is through their name: a fund called the “Hotshot High Yield Fund” should hold mostly bonds from sub-investment grade issuers. ¹ The second way this can be communicated is through the manager’s benchmark selection. An appropriate bogey allows investors to gauge the success of the fund through alpha (assuming the fund is actively managed), how much risk the manager is taking to achieve those excess returns through tracking error, and even how the fund is doing relative to competitors who utilize the same performance yardstick....

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