Madison Core Bond
For the 15 years leading up to COVID, investors operated under the belief that the Federal Reserve (Fed) would always intervene to support markets. The Fed was quick to cut rates and align with market expectations. However, the inflation shock that followed COVID has ushered in a new era, one where the Fed is more determined to follow its own path, even if it means resisting market pressures.
According to Mike Sanders, Head of Fixed Income at Madison Investments, this shift means that all fixed income risks have become relevant again—making active risk management more critical than ever in this evolving landscape.
The Madison Core Bond Fund and Madison Aggregate Bond ETF (MAGG) employ a disciplined and proven approach to fixed income management. We believe fixed income markets are inefficient, and the most effective way to take advantage of those inefficiencies is by pursuing diverse alpha sources:
- Sector and credit quality allocations
- Security selection
- Duration and yield curve positioning
Learn more about our approach to fixed income management.
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Disclosures
An investment in the Fund is subject to risk and there can be no assurance the Fund will achieve its investment objective. The risks associated with an investment in the Fund can increase during times of significant market volatility. The principal risks of investing in the Fund include interest rate risk, call risk, risk of default, mortgage-backed securities risk, liquidity risk, credit risk and repayment/ extension risk, non-investment grade security risk, and foreign security risk. Mutual funds that invest in bonds are subject to certain risks including interest rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Investing in non-investment grade securities, may provide greater returns but are subject to greater-than-average risk. More detailed information regarding these risks can be found in the Fund’s prospectus.
This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of, or guaranteed by, any financial institution. Investment returns and principal value will fluctuate.
It is Madison’s opinion that the market is inefficient. There is no guarantee that these inefficiencies exists or that Madison can identify or use them.
Alpha: a measure of the excess return of an investment relative to the return of its benchmark index. A positive alpha indicates outperformance, while a negative alpha suggests underperformance.
Bonds are subject to certain risks including interest-rate risk, credit risk and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds.
Bond ratings are grades given to bonds that indicates their credit quality as determined by a private independent rating service such as (Standard & Poor’s or Moody’s, etc.) The firm evaluates a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion. Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade. All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met. Fixed income securities are subject to interest rate and credit risk, which is a possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt. As interest rates rise, the price of fixed income securities fall s. Before investing, investors should consider carefully the investment objectives, risks, charges, and expenses of the portfolio.
Bond Spread is the difference between yields on differing debt instruments of varying maturities, credit ratings, and risk, calculated by deducting the yield of one instrument from another.
Diversification does not assure a profit or protect against loss in a declining market.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. Duration measures how long it takes, in years, for an investor to be repaid the bond’s price by the bond’s total cash flows.
Yield Curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity. There are three main types of yield curve shapes: normal (upward-sloping curve), inverted (downward-sloping curve), and flat.