MAC strategies evolved in order to give investors access to high-yield fixed income in a more diversified and better managed way than simply allocating directly to one particular area of high yield.
With the perspective of hindsight, this was a period when some degree of normalization had returned to higher yielding fixed income markets after the disruptions and turmoil of the global financial crisis (‘GFC’) five to six years earlier. But it also coincided with a stark compression of developed market sovereign bond yields across the globe as policymakers pursued unorthodox monetary policies in order to stimulate economic growth. This led to the well-documented ‘search for yield’ by investors, and for many investors, higher yielding fixed income markets provided a large part of the answer.
Mercer’s research coverage of MAC managers has formed a substantial part of our research focus since 2013, and MAC has been an area of high activity with our clients. Many clients have used MAC strategies as part of a de-risking process via which they aim to reduce portfolio reliance on equities and yet maintain a decent level of overall return.
This paper discusses how we assess and consider MAC strategies, it examines how the strategies have performed, and it looks at client activity and research coverage in this space.