Fidelity aims to help advisers see how different market conditions impact fixed income portfolios

New tool allows modeling of specific bond-exposure choices as clients ask about rising rates

Feb 4, 2014 @ 3:03 pm

By Trevor Hunnicutt

Fidelity Investments' team dedicated to answering advisers' big questions about investments has launched an interactive tool that may help advisers better understand how changing market conditions, such as rising interest rates, affect fixed-income portfolios.

The effort is the latest example of asset managers' ongoing efforts to improve their websites and educational outreach as traditional sales pitches carry less weight with advisers armed with reams of information from third-party sources.

Last summer, Fidelity hired Archan K. Basu, who previously led portfolio construction efforts for JPMorgan Chase & Co.'s private bank, to lead the Portfolio Construction Guidance Team.

When asked how they could benefit from the team's efforts, advisers said they needed more help “modeling the fixed-income part of their portfolio,” according to Bob Litle, a senior executive with Fidelity, whose responsibilities include overseeing wholesalers who recommend Fidelity mutual funds and other investment products to financial advisers.

“What's latent in some of their questions is the view that rates may go up from here,” Mr. Litle said.

Investors are awaiting higher interest rates as the Federal Reserve reduces its historic levels of bond purchases in light of economic growth.

Mr. Litle said a tool that allows advisers to create specific bond-exposure choices might do warranted damage to a simplistic view that all bonds will inevitably suffer in a rising-rate environment.

“A lot of people's instinct is, 'I'm going to lose money on bonds if rates go up,'” he explained. “It's tricky even when you understand bond math. It's not simple, and it's not easy to do in your head, even if you are an expert.”

The calculator shows advisers how time horizons and the relationship between return and duration might affect portfolios with different bond-sector exposure, Mr. Litle said. It shows potential yield, percent return, duration and volatility, along with some more advanced features.

The tool, which is free, does not recommend or analyze specific products.

“It's incumbent on us to make sure we're offering this help in a way where advisers will benefit from it separate from whether they choose any Fidelity solutions,” Mr. Litle said. “We hope we will earn a place in their portfolios.”

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