A New Approach Emerges
For decades, the world of fixed income investing had operated in largely the same way. Investors poured money into bonds issued by large corporations and governments, seeking steady returns with relatively low risk. Index funds mirrored the broader bond market. While this approach achieved stability, it also failed to adapt to changing market conditions and left investors exposed in new ways. Enter Bond Breaker, an upstart fixed income investment firm determined to rewrite the rules.
Focus on Flexibility
Rather than adhere to rigid benchmarks, Bond Breaker takes an actively managed approach. The firm’s investment committee, led by founder and CEO Jane Smith, meets weekly to evaluate economic and geopolitical developments that could impact different sectors of the Bond Breaker. This close monitoring allows it to quickly shift allocations in response to new risks or opportunities. “Our goal is to deliver value to investors through flexibility and non-consensus thinking,” says Smith. “That means being unafraid to move away from indexes if we see areas becoming overvalued or vulnerable to disruption.”
Venturing Beyond Traditional Sectors
It differentiates itself by casting a wider net than other fixed income players. While many funds focus solely on investment grade corporate and government debt, Bond Breaker searches globally for bonds across the risk spectrum, including in developing markets and less mainstream categories like securitized products and bank loans. This grants access to securities offering higher returns alongside overall portfolio diversification. “We’re not trying to mimic the overall bond market. Our job is to find the most attractive risk-adjusted opportunities, even if that means ventureing into spaces others are avoiding,” explains Smith.
A Disciplined Approach to Downside Protection
Despite their willingness to move into less conventional bond areas, Bond Breaker managers emphasize prudent risk management. All recommendations undergo intensive fundamental analysis of each issuer’s business model and balance sheet strength. Portfolio duration is also actively managed to guard against dramatic shifts in interest rates. It has also developed proprietary early warning indicators to flag securities that may be prone to downgrade, default, or technical dislocation. “We’re always thinking both offensively about return potential and defensively about how to structure the portfolio for changing conditions,” says Smith. This disciplined mindset has served as investors well, especially during periods of market turbulence.
Democratizing Smart Fixed Income Strategies
Since launching in 2018, it has achieved strong returns across various market environments, bolstering confidence in its nimble, research-driven approach. The firm has aimed to make top-tier bond portfolio management accessible to more mainstream investors as well. Bond Breaker launched its first mutual fund in 2020, marketed towards financial advisors and individual retirement accounts. Exchange-traded funds focused on select bond market sectors have followed. “Our goal is to bring the benefits of active management that large institutions have long enjoyed to average investors,” says Smith. “By democratizing smart fixed income strategies, we hope to raise industry standards of what investors should reasonably expect.”
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