Alternatives Outlook

Explore Our investment Outlook

Loans/High-Yield Bonds

We see pockets of dislocations among loans and high-yield bonds. Even though spreads have come in quite a bit, underperformance from lower-rated paper is noticeable, reflecting default and downgrade worries. 

Collateralized Loan Obligations (CLOs)

While overall pricing has improved, lower mezzanine tranches remain relatively wide. Rating agencies recently placed many CLO bonds (mostly BBB and BB) on negative watch due to potential loan collateral downgrades and defaults. Deal and manager selection are key performance drivers in this environment.

Asset-Backed Securities (ABS)

The new issuance market has slowly come back to life. We continue to like ABS, particularly consumer deals, due to their short durations and high-quality profiles. We still see opportunities to add deals with high single-digit return profiles.

Residential Mortgage-Backed Securities (RMBS)

We expect the residential housing market to decline 4% to 5% in 2020. However, we continue to see value in non-agency RMBS and emphasize credit selection. 

Commercial Mortgage-Backed Securities (CMBS)

Even though sentiment has improved, spreads remain wide as businesses or tenants stay closed.  We see large dislocations in the non-agency CMBS sector and prefer single-asset/single-borrower to CMBS.   


We generally favor quality, defensive, income-generating stocks. We’re currently overweight real estate investment trusts (REITs). The sector has taken a beating on rent payment concerns. We believe concern about the virus has peaked, and attractive valuations could generate investor enthusiasm as states reopen. We are carrying market hedges in an effort to protect the portfolio from downside risk.

Q3 2020 Investment Outlook Resources

References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

International investing involves special risk considerations, including economic and political conditions, inflation rates and currency fluctuations.

Alternative mutual funds that hold a variety of non-traditional investments also often employ more complex trading strategies than traditional mutual funds. Each of these different alternative asset classes and investment strategies have unique risks making them more suitable for investors with an above average tolerance for risk.

Diversification does not assure a profit nor does it protect against loss of principal.

Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.

Mutual fund investing involves market risk. Investment return and fund share value will fluctuate. It is possible to lose money by investing in mutual funds.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

No offer of any security is made hereby. This material is provided for informational purposes only and does not constitute a recommendation of any investment strategy or product described herein. This material is directed to professional/institutional clients only and should not be relied upon by retail investors or the public. The content of this document has not been reviewed by any regulatory authority.

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