Fixed-income investing at John Hancock Investment Management

Fixed-income investments have a vital role to play in a broad range of diversified portfolios, from dampening equity volatility to providing current income and pursuing capital preservation.

Fixed-income funds are designed to help:

Provide diversification from equities
Generate current income
Add stability to a portfolio

EXPLORE OUR FUNDS

Fixed-income funds are designed to help:

Provide diversification from equities
Generate current income
Add stability to a portfolio

EXPLORE OUR FUNDS

Bond investors face new challenges

Bond prices tend to move in the opposite direction of interest rates, and for nearly three decades, longer-term interest rates steadily declined, sending prices on existing bonds higher. Today’s historically low rates have already begun to rise, and bond investors could discover that their portfolios contain more risk than they intend.

After 30 years of declining rates, bond investors need new sources of return

Source: U.S. Department of the Treasury, Federal Reserve Bank of St. Louis, as of 12/31/18. For illustrative purposes only. The benchmark for short-term lending, the federal funds rate is periodically set by the Federal Reserve Board and reflects the interest rate banks charge each other for overnight loans. The rising-rate periods included in the illustrations above are 9/30/98–5/31/00, 5/30/03–6/29/07, 12/31/08–4/30/10, 7/31/12–12/31/13, and 7/31/16–4/30/18, five of the longest periods of broad interest-rate increases during the past 30 years.

Passive strategies have significant exposure to interest-rate risk

Because the income offered today in many bond market sectors is so low, it could take years for coupon payments to make up for capital losses due to rising rates. According to one study, in an average rising-rate scenario (where rates rise 3% over about three years), bondholders in the highest-rated securities could lose more than 22% of their bond portfolios’ principal value during that period.¹

Source: “When Bonds Fall: How Risky Are Bonds if Interest Rates Rise?” Welton Investment Corporation, 2012.

Source: MSCI BarraOne, John Hancock Investment Management, as of 12/31/18.

Look beyond mainstream bond funds for more promising opportunities

During periods of rising interest rates over the past 30 years, U.S. Treasuries and core U.S. bonds have historically been among the worst performers.  More specialized sectors, on the other hand, generally fared well, in part because they're less reliant on declining interest rates to fuel performance. Today, these sectors tend to offer higher yields as well.

yield

Annualized return during rising rates

High-yield bonds

Debt issued by lower credit quality companies, typically less sensitive to interest rates and driven more by corporate fundamentals

7.89%

11.66%

Emerging-market debt

Debt issued by governments and corporations within developing economies, often buttressed by strong demographic trends, such as growing consumer classes

7.00%

10.45%

Floating-rate notes

Interest payments on these bank loans made to corporations float along with interest rates, paying higher coupons as rates rise

10.13%

Short-term credit

Bonds with shorter maturities are less sensitive to rising rates since bondholders can expect to have their principal repaid relatively soon

3.25%

yield

Annualized return during rising rates

Mortgage-backed securities

Income payments to these bonds are derived from pools of mortgages, and as housing fundamentals improve, the risk of defaults tends to decrease

2.34%

Core U.S. bonds

U.S. investment-grade bonds dominated by government securities whose returns are driven by rate movements

1.71%

10-year U.S. Treasuries

Some of the most heavily traded securities in the world, 10-year U.S. Treasuries are the de facto proxy for intermediate-term interest rates

2.69%

–2.66%

Source: MSCI BarraOne, Morningstar Direct, Stone Harbor Investment Partners, Bloomberg, as of 12/31/18. Emerging-market debt is measured by the J.P. Morgan Emerging Markets Bond Index (EMBI) Global Diversified Index, which tracks U.S. dollar-denominated Brady bonds, loans, and Eurobonds of external debt instruments in the emerging markets. High-yield bonds are measured by the Intercontinental Exchange (ICE) Bank of America Merrill Lynch (BofA ML) U.S. High Yield Master II Index, which tracks the performance of globally issued, U.S. dollar-denominated high-yield bonds. Core U.S. bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index (Agg), which tracks the performance of U.S. investment-grade bonds in government, asset-backed, and corporate debt markets. Mortgage-backed securities are measured by the Bloomberg Barclays U.S. Mortgage-Backed Securities Index, an unmanaged index comprising 15- and 30-year fixed-rate securities backed by the mortgage pools of Ginnie Mae, Freddie Mac, and Fannie Mae. Floating-rate notes are measured by the S&P/LSTA Leveraged Loan Index, which tracks the market-weighted performance of U.S. dollar-denominated institutional leveraged loan portfolios. Short-term credit is measured by the Bloomberg Barclays 1–5 Year U.S. Credit Index, which tracks the performance of investment-grade U.S. corporate and government-related bonds with maturities between one and five years. 10-year U.S. Treasuries are measured by the ICE BofA ML 10-year U.S. Treasury Index, a one-security index comprising the most recently issued 10-year U.S. Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 10-year note must be auctioned on or before the third business day before the last business day of the month. It is not possible to invest directly in an index. Past performance does not guarantee future results.

Broadening your fixed-income portfolio can help you lessen risks and potentially boost returns

Adding more types of fixed-income investments to your portfolio doesn’t necessarily mean taking on more risk. In fact, a broadly diversified bond portfolio generated more income and higher returns than an index-oriented portfolio over the past 10 years, and did so with less volatility.

Traditional index-oriented portfolio

Diversified bond portfolio

Income generation

3.28%

4.84%

Average duration (years)

6.19

4.83

10-year annualized return

3.48%

5.17%

Standard deviation  (over three years)

2.88%

2.35%

Ending value of $100,000 invested 10 years ago (rebalanced quarterly)

$144,824

$162,335

Core U.S. bonds

Emerging-market debt

High-yield bonds

Mortgage-backed securities

Floating-rate notes

Short-term credit

Source: Morningstar Direct, as of 12/31/18. For illustrative purposes only. Diversification does not guarantee a profit or eliminate the risk of a loss. Standard deviation is a statistical measure of the historic volatility of a portfolio. It measures the fluctuation of a fund’s periodic returns from the mean or average. The larger the deviation, the larger the standard deviation and the higher the risk. Past performance does not guarantee future results. Not indicative of any John Hancock fund.

Finding the best specialized manager for every fund we offer

Our multimanager approach puts us in a unique position to evaluate the skill sets, track records, and experience of today’s portfolio managers, and our fixed-income lineup features a range of portfolios managed by some of the industry’s best teams.

Explore our fixed-income funds

At John Hancock Investment Management, our fixed-income funds are designed to pursue a range of investor goals. We’ve offered fixed-income strategies to individual and institutional investors for more than 30 years, and today we oversee nearly $25 billion in fixed-income assets across a range of strategies, managed by some of the best specialized portfolio teams from around the world.

As of 9/30/18.

TICKER	FUND NAME	MANAGED BY	MORNINGSTAR CATEGORY	USE FOR
JHBIX	Bond Fund	Manulife Investment Management	Intermediate Core-Plus Bond	Diversifying income holdings
JCAFX	California Tax-Free Income Fund	Manulife Investment Management	Muni California Long	Tax planning strategies
JBOIX	ESG Core Bond Fund	Breckinridge Capital Advisors	Intermediate Core Bond	Opportunistic fixed-income holding
JMKIX	Emerging Markets Debt Fund	Manulife Investment Management	Emerging Markets Bond	Diversifying income holdings
JFIIX	Floating Rate Income Fund	Bain Capital Credit	Bank Loan	High current income and reducing interest-rate risk
JGIFX	Government Income Fund	Manulife Investment Management	Intermediate Government	High-quality income opportunities
JYHIX	High Yield Fund	Manulife Investment Management	High Yield Bond	Generating income
JHYMX	High Yield Municipal Bond Fund	Manulife Investment Management	High Yield Muni	Tax planning strategies
JSTIX	Income Fund	Manulife Investment Management	Multisector Bond	Diversifying income holdings
JHS	Income Securities Trust	Manulife Investment Management	Closed-End Intermediate Core-Plus Bond	Diversifying income holdings
TIUSX	Investment Grade Bond Fund	Manulife Investment Management	Intermediate Core Bond	High-quality income opportunities
JHI	Investors Trust	Manulife Investment Management	Closed-End Multisector Bond	Diversifying income
HPI	Preferred Income Fund	Manulife Investment Management	Closed-End Preferred Stock	Diversifying sources of income
HPF	Preferred Income Fund II	Manulife Investment Management	Closed-End Preferred Stock	Diversifying sources of income
HPS	Preferred Income Fund III	Manulife Investment Management	Closed-End Preferred Stock	Diversifying sources of income
JSNIX	Short Duration Bond Fund	Manulife Investment Management	Short-Term Bond	High-quality income opportunities and reducing interest-rate risk
JMBIX	Short Duration Credit Opportunities Fund	Stone Harbor Investment Partners	Multisector Bond	Diversifying income holdings and reducing interest-rate risk
JIPIX	Strategic Income Opportunities Fund	Manulife Investment Management	Multisector Bond	Diversifying income holdings
JTBDX	Tax-Free Bond Fund	Manulife Investment Management	Muni National Long	Tax planning strategies

Request a fixed-income audit

Financial advisors: Request a complimentary analysis of your fixed-income allocations to ensure you’re positioned appropriately for today’s market. Together, we’ll conduct a:

• Comprehensive performance review of the funds you select

• Detailed portfolio characteristics comparison

• Sector exposure X-ray to identify potential areas of overlap

• Full risk/return analysis across market cycles

Investing involves risks, including the potential loss of principal. These products carry many individual risks, including some that are unique to each fund. Please click a fund's name above to learn all of the risks associated with each investment.