Expanding the Opportunity Set in Multi-Sector Fixed Income
March 2026
By Justin Hook, CFA, Director – Multi-Sector Portfolio Management
Figure 1: Index Spreads by Sector (bps) - 3y Lookback
Sources: Bloomberg Indices, Bank of America Merrill Lynch, and Symetra Investment Management as of 1/31/2026
In 2025, financial markets were shaped by heightened volatility and rapid swings in risk sentiment, driven by trade policy uncertainty, tariff-related shocks, and an expanding set of geopolitical risks. Fed policymakers faced mounting challenges, including stubborn disinflation, a softening labor market, and data disruptions from the longest government shutdown on record. Despite elevated uncertainty, credit spreads remain tight and credit curves largely flat but there have been some green shoots, namely strong corporate earnings and robust balance sheets. Turning to the consumer, confidence has weakened and remains subdued as growth expectations moderate, with economic data pointing to a bifurcated economy in which low- and middle-income consumers face rising strain relative to higher-income households. Looking ahead into 2026, fixed income investors are likely to face ongoing uncertainty but maintaining a long-term perspective while tactically exploiting volatility can create opportunities for attractive risk-adjusted returns.
Figure 2 - Spread and Duration Comparison by Index/Strategy
|
Index/Strategy |
Average Spread |
Duration |
|
US Aggregate |
24 |
6 |
|
CML Core1 |
190-230 |
5 |
|
CML Bridge1 |
335-425 |
3 |
|
SIM Private ABS A-rated1 |
175-300 |
3-72 |
1 SIM provided spreads
2 Average spread and duration vary by asset class. Spread measures the yield difference between the bond or debt instrument and risk-free benchmarks of similar maturity or duration, reflecting the additional risk associated with bond or debt instrument.
Sources: Bloomberg Indices and Symetra Investment Management as of 1/31/26
Market Outlook and Opportunity
In today’s market, institutional investors can no longer rely on a siloed approach by allocating across traditional fixed income asset classes alone and instead should also look to actively add private, illiquid asset classes to their investment opportunity set. A holistic, multi-sector investment strategy that seeks to generate attractive long-term total returns while emphasizing principal preservation and drawdown mitigation provides a compelling framework for navigating the current market environment. Spread dispersion across asset classes has compressed and until it widens again, we we believe that allocating to illiquid assets to earn illiquidity and complexity premium rather than moving down in credit quality is a compelling strategy. With that backdrop, we see opportunity across private ABS and commercial mortgage loans (CMLs). CMLs spreads have not tightened to the same degree as other risk assets, so they still provide a meaningful uplift relative to investment grade corporates.
Our focus is on smaller commercial loans that are diversified across both property types and regions, and have strong loan protections. CMLs provide a strong ballast to the portfolio from increased portfolio carry, and predictable and stable cash flow. Further, there are opportunities to shift away from public ABS markets into private ABS markets. While they potentially share similar credit risk or collateral types, investors can pick up spread and achieve additional structural protections that can enhance downside protection. In public ABS, investors navigate market headwinds primarily through security and sector selection. In private ABS, however, you have the ability to negotiate more favorable structures directly with the sponsor and meaningfully influence key considerations such as collateral eligibility, cash flow waterfalls, and stronger performance triggers. The current environment presents an attractive opportunity to secure these terms. Private markets may offer attractive opportunities; however, allocation decisions should reflect each investor’s specific circumstances, existing exposure, and liquidity needs. Despite their relative illiquidity, private ABS and CML allocations can still offer predictable cash flows when their allocation is structured intentionally as part of a robust investment framework. Flexibility can be enhanced by constructing a duration ladder and incorporating shorter-WAL private ABS that amortizes immediately, such as auto and other consumer loans collateral types. Additionally, the CML that we invest in are typically bulleted across 3y, 5y, or 7y tenors and historically have had a high certainty of repayment which increase the ability to help manage cash needs over time.
The integration of public and private fixed income assets enhances portfolio resilience. SIM combines active risk management and disciplined portfolio construction to deliver a durable, differentiated multi-sector fixed income strategy.
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