Given three recent Federal Reserve rate hikes and the potential for more to come, we believe it may be prudent for Defined Contribution (DC) plan fiduciaries to diversify investment menus by considering satellite fixed income options to complement to core bonds. Core bond allocation can act as “ballast” in a portfolio and typically forms the foundation of a portfolio’s duration, yield and income structure. Satellite fixed income options such as High Yield Bonds, Senior Loans, Emerging Markets Debt and International Bonds are usually added to investment menus in an effort to provide a potential solution for higher yield, return, mitigation against risk, and/or diversification benefits.

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