Lindsay Rosner, head of multisector investing at Goldman Sachs Asset Management, is advising investors that now is an opportune time to reconsider their cash holdings. With the term premium back on the table and 99% of investment-grade bonds out-yielding cash, the financial giant is outlining strategies for 2025 that emphasize transitioning from short-term cash instruments to longer-duration bonds. This move aims to maximize yield potential as investors look beyond the current 4.18% yield in the Crane 100 Money Fund Index.
The Goldman Sachs Bond Fund highlights top corporate issuers such as Bank of America, T-Mobile, Boeing, Morgan Stanley, and UBS. Moreover, the fund favors structured products like collateralized loan obligations and commercial mortgage-backed securities due to their relative value. The Access U.S. Aggregate Bond ETF by Goldman Sachs currently boasts a 30-day SEC yield of 4.50%, underscoring the potential benefits of shifting investments from cash.
"All the money sitting in cash or money market funds — it can start to move out the curve and be compensated with more yield and more spread," Rosner emphasized.
The financial landscape presents a multitude of opportunities for investors willing to diversify their portfolios. For those considering high-yield bonds rated BB and B, Rosner advises taking a name-specific approach to mitigate risks. She stresses the importance of performing detailed credit assessments to identify credits that can withstand a high-interest-rate environment.
"There's going to be a lot to navigate with tight spreads and making sure … that you do that credit work — and find out what are the credits that are going to be able to pay you back and not default and can live in a high-interest-rate environment, and which ones do you want to stay away from," Rosner explained.
The current market dynamics offer relative value across various sectors, yet they require careful navigation. Financials are identified as particularly interesting by Rosner, while she remains underweight on autos due to market concerns. The difference in yield between Treasurys and other fixed-income assets, known as spreads, is a critical factor in this investment strategy.
"So there's places to pick and opportunities in a lot of areas due to relative value," Rosner noted.
Goldman Sachs' strategy for fixed-income investments involves leveraging these opportunities while maintaining diversification to ensure stable returns.
"The key to really repeatable and stable returns is diversification," Rosner stated.
With term premiums returning and investment-grade bonds outperforming cash yields, Goldman Sachs encourages investors not to miss the opportunity to reposition their portfolios.
"The opportunity is here, alive and well, but now really is the time to start thinking about moving out on the curve," Rosner affirmed.