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Putting the Income in Fixed Income

What’s in the News…

Callan Institute recently published research focusing on how institutional investors can achieve a 7.5% return while minimizing risk.  Using an optimizing tool to find this efficient frontier, with the asset mix based on forward-looking capital market projections (which Callan created), the research yielded some interesting results.

Callan’s research found that the most efficient way to realize a 7.5% return were the following allocations for the three calendar years examined:

  • 1995: 100% broad U.S. fixed income, with a standard deviation of 6%.
  • 2005: 48% in what Callan called “relatively risky, return-seeking assets” and 52% in fixed income. That 7.5% return had a standard deviation of 8.9%. 
  • 2015: 88% in “return-seeking assets,” and only 12% in fixed income.  That period’s return had a 17.2% standard deviation.

In 2015, the standard deviation was almost double that of the 2005 deviation and nearly triple that of the 1995 time frame.  

Source: Callan Capital Market Projections, Callan Risky Business


What are we thinking?

The dramatic decline in the asset allocation in fixed income, from 100% to 12%, is what the Callan Institute found surprising. 

As Callan hypothesized, to reach a return of 7.5% in today’s market requires investors to take more risk. But taking more risk may not be suitable for all investors. However, in an environment with declining interest rates and falling bond yields or increasing interest rates and rising yields, investors would have to take on more risk for return.  So what is an investor to do?

At Roosevelt, we manage fixed income as a solution for cash flow and not for total return. As income investors we appreciate that total return includes interest, capital gains, dividends and distributions that are realized over a certain time period. Instead of reaching for that 7.5% return in today’s market place we strive for reducing risk and providing investors with a sustainable and substantial income stream.

If you are considering fixed income in an asset allocation with today’s market uncertainties, know that our Current Income Portfolio is structured to benefit from a rising rate environment while also providing income investors with high income in low rate environments.  So, in an environment of expected interest rate hikes, why not try to maximize income instead of incorporating more risk into your portfolio. 



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.


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The Roosevelt Investment Group, Inc. is an independent investment management firm that is not affiliated with any parent organization. The Roosevelt Investment Group, Inc. manages equity, fixed income, and balanced assets for primarily U.S. clients. The Roosevelt Investment Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission and notice filed in all 50 states.

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