FTSE Russell fixed income perspectives: 

Key takeaways:

• The economic backdrop and asset class fundamentals have forced investors to revisit their fixed income allocations
• The fixed income landscape is evolving past the idea of traditional “core” portfolios, viewing the space more through the lens of tactical building blocks or strategic sector rotation
• The exchange-traded fund (ETF) has taken more granular, indexed areas of the market and made them investable. Where the ETF goes, innovation seemingly following. There is plenty of room for continued product innovation in specific sectors and subsectors. We anticipate continued innovation and growth in the fixed income fund market throughout 2025
• Fixed income posted modest gains amid market volatility. U.S. fixed income funds returned a positive 3.68% on average, marking the second consecutive plus-side performance following 2022’s record loss (-9.83%)—Q4’s bear steepener erased a strong start to the year
• Managing duration has been paramount in fixed income, with shorter duration and higher yielding assets ending the year as top performers—FTSE High Yield Index (+8.49%) was not only the top performing broad-based index, but also the only to report Q4 gains (+0.23%)
• While there is still geopolitical and macroeconomic uncertainty in the near-term, fixed income has revived its standing as a viable alternative to equity markets. As fixed income re-enters the limelight, its critical to understand the nuances and trends within each sector

Points of differentiation:

• The paper primarily leverages FTSE Russell Fixed Income indices and data, while also being supported by LSEG Lipper and various LSEG Workspace applications
• This analysis will be paired with year-long sector specific analysis, diving into the unique risk return characteristics defining the fixed income market
• FTSE Russell Fixed Income Perspectives is backed by Fixed Income Index Module (FIXM) which allows for both analysis of traditional fixed income sectors but has the ability to take a product thesis from ideation to creation

What does our research mean for investors?

• As with all FTSE Russell Fixed Income research, we hope to enable individuals to make more informed investment decisions about their fixed income allocations
• By identifying the unique risk/return characteristics and flow trends of individual sub-sectors, we hope to highlight how the fixed income ecosystem is evolving beyond traditional strategies and demonstrate the opportunity for continued product innovation