Invesco
Institutional investors have become accustomed to low yield in some areas of fixed income they have historically depended upon. This is hardly news, and Invesco’s 2021 Long-Term Capital Market Assumptions anticipates that yields are likely to stay low. This expectation and investors’ need to meet return objectives in a challenging environment are driving a trend of investment “barbelling,” a not-so-new concept that has been reconsidered, reimagined, and recast to face the challenges confronted by today’s institutional investors.
The barbell concept – a portfolio construction that focuses roughly half of allocations on near-term tactical investments and the remaining half on longer-term assets – is familiar to most investors, but effectively implementing this approach is not as simple as the visual image it calls to mind. It requires substantial investment expertise and resources, but it’s a hot topic at the moment because it allows for tremendous flexibility and the incorporation of two things that institutions find very appealing: private market investments and next level, customizable index investing that seeks returns beyond while also reducing costs (and perhaps contributing to the risk budget allocated to private markets).