As Rates Rise, do Bonds Belong in Real-World Portfolios?

The first quarter of 2022 saw negative returns across the U.S. bond market as persistently rising inflation surprised central bankers and bond investors alike. Dramatically rising interest rates have focused bondholders’ attention on fixed-income investments – even provoking some to abandon the asset class entirely.  

In this episode of Market Currents, Northern Trust’s Katie Nixon welcomes Peter Mladina, director of portfolio research for Wealth Management, to explore the purpose of fixed-income securities in volatile and uncertain conditions, which seem likely to shape the investing landscape for the foreseeable future. 

Mladina discusses:

• The unique role of safer, risk-control assets in a portfolio and the foundational function they hold alongside return-seeking risk assets. 
• How investors can structure a portfolio to secure high-priority goals by matching the maturity of risk-control assets with expected liquidity needs. 
• Northern Trust’s Portfolio Reserve and how it is customized to secure a specified number of years of lifestyle spending.
• Interest-rate risk and its headline role among the types of risk that fixed-income investors are exposed to, and a the way risk-control assets hedges them all through periods of volatility and unpredictability. 

Peter Mladina is responsible for applying research, tools and methods that support asset allocation, portfolio construction, investment selection and best practices in portfolio management to the wealth management investment process.

Peter is an Adjunct Professor of Economics at UCLA, where he teaches applied finance for the Master of Applied Economics program. His research on asset allocation and portfolio construction has been published in peer-reviewed journals and he is a co-author of the CFA Institute’s revised Level III asset allocation curriculum. He received a Bachelor of Arts degree in Economics from UCLA and Master of Business Administration degree from Edinburgh Business School.