Insights

Indexed Fixed Income Delivering Precise and Reliable Outcomes

April 7, 2025

Our Indexed Fixed Income franchise has been a notable highlight for State Street Global Advisors, with exceptional progress achieved over the last five years. Moreover, we continue to see strong interest in the asset class despite volatile markets and an uncertain economic outlook. We believe that the innovative and systematic approach we take to consistently deliver indexed returns is a key factor in our clients’ decisions to partner with us to achieve their fixed income goals.

The strength of demand for indexed fixed income strategies managed by State Street Global Advisors is illustrated by net inflows of over $230 billion over the past five years. Even with an uncertain market outlook and the significant ramifications for an asset class so closely tied to the path of interest rates, we still achieved positive inflows of $54 billion into our indexed fixed income platform in 2024, marking the second highest year on record. These flows were realized primarily within our government and multi-sector strategies, though both investment grade and high yield credit strategies attracted notable interest as well.

Figure 1: Sustained Growth in Indexed Fixed Income AUM

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The views expressed are the views of State Street Global Advisors’ Global Fixed Income Strategist team through March 2025, and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected.

Diversification does not ensure a profit or guarantee against loss.

Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.

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Past performance is not a reliable indicator of future performance.

This document provides summary information regarding the Strategy. This document should be read in conjunction with the Strategy’s Disclosure Document, which is available from SSGA. The Strategy Disclosure Document contains important information about the Strategy, including a description of a number of risks.

The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s sustainable strategy criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s sustainable strategy criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.

R-Factor scoring is designed by State Street to reflect certain sustainability factors and does not represent investment performance. Results generated out of the scoring model are based on sustainability dimensions of a scored entity.

SSGA defines a “Sustainable Investing Account” as a client account (i.e., fund or separately managed account managed by SSGA) that utilizes an investment strategy that falls into one of the following three categories, which are not mutually exclusive:

Negative Sustainable Investing Screen: A “Negative Sustainable Investing Screen” (also known as an exclusionary screen) is a screen incorporated into the investment strategy utilized for the management of a portfolio that results in the exclusion from the portfolio of securities of issuers that fail to satisfy certain sustainability criteria (e.g., because the issuers comprise part of a sector or industry). Negative Sustainable Investing Screens include but are not limited to SSGA Point of View (“POV”) screens, norms-based screens, Socially Responsible Investing (SRI) screens, and screens provided by other third parties (including client-directed screens). Where a client’s investment agreement and/or investment guidelines specify, or the client otherwise communicates to SSGA that the application of a negative screen is to satisfy a purpose other than sustainable investing (e.g., diversification), such screens do not qualify as a Negative Sustainable Investing Screen.
Note: There are several ways in which a company can be considered to be involved in a particular product or service, and a screening methodology, along with coverage limitations, may result in a negatively screened portfolio having some exposure to the screened criteria.
Positive Sustainable Investing Screen: A “Positive Sustainable Investing Screen” is a screen incorporated into the investment strategy utilized for the management of a portfolio that intentionally includes securities of issuers identified as having positive sustainability characteristics relative to the issuer’s industry or sector peers. Positive Sustainable Investing Screens target an improvement of a portfolio’s sustainability profile as compared to a benchmark or stated investment guideline, measured by a sustainability score or a sustainability metric, or invest only in issuers within an industry or sector that score higher within that industry or sector than the issuer’s peers.
Third-Party ESG/Sustainable Investing Index Investment Strategies: An index-tracking client account qualifies as a Sustainable Investing Account if it tracks a Third-Party ESG/Sustainable Investing Index. An index is deemed to be a “Third-Party ESG/Sustainable Investing Index” if the index methodology incorporates ESG/sustainability factors or characteristics that are utilized by the third-party index provider to determine which securities and/or how much in weight are included as index constituents. A client account that utilizes a Third-Party ESG/Sustainable Investing Index as a reference benchmark for performance or reporting purposes, but does not seek to track such index as an investment strategy, does not qualify as a Sustainable Investing Account unless it meets at least one of the first two prongs of the definition of “Sustainable Investing Account” set forth above.

The methodology used by SSGA to identify Sustainable Investing AUM (see page 3) may differ from the methodology used under certain classification and disclosure regulatory regimes. SSGA makes no representation that an account identified as a “Sustainable Investing Account” satisfies all Sustainable Investing categories under the SSGA Sustainable Investing Account Identification Policy. A Sustainable Investing Account may satisfy only one of the three categories described above, and within that category it may incorporate a single sustainability factor or exposure. SSGA’s Sustainable Investing AUM may include AUM of client accounts for which a negative screen is applied at the request of the client for regulatory or other purposes, which may not be disclosed to SSGA, that SSGA believes results in the exclusion from the client’s portfolio of securities based on sustainability criteria.

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