During the fourth quarter of 2020, FISR finished up in absolute returns and outperformed the Bloomberg Barclays US Aggregate Bond Index. The fund finished the quarter with overweights to long-term corporate bonds, mortgage-backed securities (MBS) and high-yield bonds.
Performance Fixed income sector positioning was advantageous. Despite soaring COVID-19 cases, markets appeared to look through near-term headwinds and towards renormalization in 2021. This optimism lifted credit bonds with both high yield and investment-grade credit meaningfully outperforming the US Aggregate Bond Index. Targeted allocations to both intermediate and long-term investment-grade bonds were the biggest positive contributors. Our high yield allocation at the beginning of October also aided performance. Elsewhere, allocations to intermediate Treasuries and MBS weighed on relative performance. As credit bonds advanced, the US Treasury curve steepened and 10-year yields moved up 24 bps, leading to underperformance from our targeted allocation.