In today’s rising rate environment, traditional fixed income may struggle to deliver the same types of total returns that it has in the past. Historically, as interest rates rise, bond prices fall, often resulting in declining in returns for traditional fixed income products.
Looking ahead, we believe investors need to expand their investable universe beyond traditional fixed income to find attractive income opportunities. However, many non-traditional income generating assets come with their own unique risks, which can make them difficult to navigate.
Oppenheimer Global Multi-Asset Income Fund seeks to deliver attractive and consistent levels of monthly income by actively allocating across various income-producing asset classes – including not only traditional fixed income, but also stocks, real assets and alternatives.
This Fund was specifically designed to address investor demand for diversified sources of income given the low rate environment and a large population of retiring Baby Boomers. It is designed to serve as a core portfolio holding for conservative investors who are seeking monthly income.
It will typically have less sensitivity to bonds and interest rates due to the diversity in underlying exposures across traditional and non-traditional income generating assets.
The Team’s Approach to Risk Management
The team employs a risk-aware approach that looks to mitigate the downside during times of stress. This active approach to risk management plays a significant role in the investment process and is done in two ways:
- Continual adjustment of the portfolio’s asset allocation to target a certain level of risk.
- Active hedging of unwanted risk in the portfolio to mitigate the effects of shocks in the broad market.
Potential risks are also monitored closely through stress tests and scenario analyses to identify potential vulnerabilities.
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value.
Alternative asset classes may be volatile and are subject to liquidity risk. Derivative instruments entail higher volatility and risk of loss compared to traditional stock or bond investments. Exchange traded notes (ETNs) whose returns are linked to the performance of an index and are subject to the risk of industry or sector concentrations. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Emerging and developing market investments may be especially volatile. Fixed income investing entails duration, credit and interest rate risks. Interest rate risk is the risk that rising interest rates or an expectation of rising interest rates in the near future will cause the values of the Fund's investments to decline. Credit risk is the risk that the issuer of a security might not make interest and principal payments. Risks associated with rising interest rates are heightened given that rates in the U.S. are at or near historic lows. When interest rates rise, bond prices generally fall, and the Fund’s share prices can fall. Below-investment-grade (“high yield” or "junk") bonds are subject to greater price fluctuations than investment grade securities, are more at risk of default and are subject to liquidity risk. Event-linked securities are fixed income securities, otherwise known as Cat Bonds, for which the return of principal and interest payment is contingent on the non-occurrence of a trigger event that leads to physical or economic loss. If the trigger event occurs prior to maturity, the Fund may lose all or a portion of its principal and additional interest. Municipal bonds are subject to default on income and principal payments.
Inflation-indexed debt securities are subject to the risks associated with investments in fixed income securities. Mortgage-related securities are subject to default risk, prepayment risk, interest rate risk, and credit risk, and may be more volatile and less liquid than other types of securities. Small and mid-sized company stock is typically more volatile than that of larger company stock. It may take a substantial period of time to realize a gain on an investment in a small-sized or mid-sized company, if any gain is realized at all. Investing in other investment companies is subject to risks of the underlying portfolio. Investments in real estate companies, including REITs or similar structures, are subject to volatility and risk. Smaller real estate companies may also be subject to liquidity risk. Investing in MLPs involves additional risks as compared to the risks of investing in common stock, including risks related to cash flow, dilution and voting rights. The Fund’s investments in securities issued by MLPs are concentrated in the energy infrastructure industry which may be subject to increased volatility. Energy infrastructure companies are subject to risks specific to the industry or sector such as fluctuations in commodity prices, reduced volumes of natural gas or other energy commodities, environmental hazards, changes in the macroeconomic or the regulatory environment or extreme weather. MLPs may trade less frequently than larger companies due to their smaller capitalizations. Additional management fees and other expenses are associated with investing in MLP funds.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.