Why Individual Investors Should Consider Seeking Alternative Credit
Bond returns in the U.S. have had a historically bad year, with the Bloomberg US Aggregate Bond Index experiencing a -13.0% return.
This index is widely used to measure the publicly traded bond market. The main cause of these losses was the Federal Reserve's unexpected increase in interest rates due to inflation. Another factor to consider is the significant rise in government spending during the pandemic, which led to higher borrowing costs and impacted bond rates and prices.
However, what many people miss is recognizing how broad the income asset class is. With one of the most noteworthy categories today being Alternative credit, which should be considered separate from mainstream fixed-income securities such as U.S. Treasuries, high-quality corporate bonds, and municipal bonds.
This alternative category has expanded in size in the last decade, as the low-interest rate environment has driven investors to seek higher nominal yields.