Watch as Harry Hardy, Investment Director for the Fidelity Global Bond Fund dives into one of the biggest questions facing investors today: what role should bonds and duration play in portfolios?
We explore how fixed income is reclaiming its place as a true diversifier, how defensive positioning matters more than ever, and why not all bonds offer the same protection in a risk‑off environment.
Key takeaways
- Bonds are returning as effective diversifiers, with today’s higher yields providing a meaningful buffer in risk‑off environments.
- Investors may be underestimating vulnerabilities in credit markets, with valuations assuming near‑perfect conditions and growing signs of stress in opaque areas like private credit.
- Fidelity’s fixed income approach is contrarian and high‑conviction, leveraging active positioning and high turnover to capture opportunities.
This video was filmed on 11 February 2026
From a client portfolio perspective, one of the debates around bonds, generally, is the role of bonds in portfolios. Traditionally, one of the key roles that bonds have played in portfolios is that diversifier to your equity exposure, for example. What's your view on that?
I think for where we are at this juncture, bonds offer a great diversifier to a portfolio. Obviously, those correlations that you mentioned come under challenge in 2022 and we need no reminder of what happened there. But I think it's important to remember, that has worked for many decades prior to that and we're at a very different juncture at this point now in 2026 than we were at, say, the end of 2021 or the start of 2022. That attractive yield where we are today is a buffer to total returns and that can really act as a support in a risk-off scenario.
I would really make the point though: what kind of fixed income allocation is being defensive, being low on credit risk, having duration within there, does act as a buffer. I think maybe some clients fall into the trap of seeing all bonds as equal. Equally, if you were to have a lower duration strategy, very high in credit and with high yield exposure, that role as a buffer in a risk-off scenario isn't there to quite the same extent.
There are a wide range of options for investors to choose from when it comes to investing in bonds. How does Fidelity’s approach to portfolio management differentiate?
In my view, one of our key differentiators is that carefully contrarian approach - we're quite happy to go against the grain. We're not chasing a market consensus, and we also have a relatively high turnover in the portfolio of around 200 to 300%. So typically, we will buy a credit position if we see a spread tightening event on a three-to-six-month horizon. It's that concentrated approach that I feel sets us apart.
A position that we've had in the Fund for quite some time is an overweight stance in the 30-Year part of the U.S. Treasury curve and we're challenged at length from our clients on that. Ultimately, that has been very positive in our positioning in recent times.
One of the things that's quite interesting, and you alluded to it, is that Fidelity is very much known as an equity shop, but the fixed income team leverages the Fidelity IP as part of their process, which I think is quite interesting. We have around 100 billion U.S. dollars of assets under management in fixed income, a substantial fixed income platform in its own right.
But I think what's really great about being part of a wider equity house or a wider house that has a specialty in equities is that we have a huge equity research team, and also, a substantial credit research team. Why that's important is, if our equity analyst, for instance, is meeting with a CEO, a CFO, speaking to an equity analyst, they would be far more comfortable talking about share buybacks, which is very equity positive, but not necessarily that credit friendly. Having that 360 approach to management is really vital in building a position out from a bottom-up perspective.
I think what's also particularly interesting that we leverage on, on the equity analyst is identifying turning points in the market, identifying what companies are saying regarding Christmas sales, Black Friday sales, what their sense is on the ground. And that really helps to drive that macro top-down view.
Thinking about our contrarian approach, what are is the key thing that you think that investors are not paying enough attention to?
I think there's a lot of complacency out there. Once again, this view that credit spreads are going to continue to grind tighter and there can be no catalyst to push them wider, I think is quite challenging. There's a lot of complacency within those valuations, it seems to really ignore a lot of the risks that we have ahead - almost pricing for perfection, which is challenging to see.
If you'd have asked me six months ago, I'd have said private credit and many would push back on that, yet that's starting to ring truer currently. Some of our concerns around that sense are on including the lack of transparency: What are these private credit investments actually invested in? We're seeing a little bit more noise come out on that, regarding the software sector. It's how that spills over into many other sectors and the role that insurance plays in that.
