AB American Income Portfolio

Balancing Income and Stability in Evolving Markets

Finding investments that generate a high level of income while safeguarding capital is hard in the best of times. It’s even tougher in the current environment marked by high inflation, tight monetary policy and muted economic growth. Given the uncertain backdrop, it takes real expertise to find attractive sources of income while limiting downside risk.

See How AIP Balances Income and Stability in Evolving Markets

How AB’s approach works

The barbell approach

We balance two major fixed-income risks—interest rate (duration) and credit—by seeking the best mix of US dollar bonds i.e., pairing high-yield corporate bonds and other credit assets with high-quality government debt in a barbell approach
This tactic is a good way to generate income while limiting downside risk because the returns of each tend to be negatively correlated—one does well when the other struggles, and the weightings can be altered as valuations and market conditions change

Dynamic Asset Allocation

Investment allocations are dynamically adjusted as market conditions change. This means using a disciplined investment process to actively manage the risk exposure between more stable high-quality bonds and higher-yielding return-seeking bonds
Doing so helps to preserve capital and reduce the impact of big market falls, leading to better potential for capital growth over the long term

Picking the Right Bonds

Choosing the right bonds requires intensive research. We look at individual issuers and issues to pick bonds that have the right mix of high income and stability
We also combine both quantitative and fundamental research to discover opportunities that others may miss

Why AB American Income Portfolio?

The AB American Income Portfolio (AIP) seeks to provide a high level of current income consistent with preservation of capital by investing in a diversified portfolio of US dollar-denominated bonds, including investment grade, high yield, non-investment grade bonds/fixed income securities within and outside of the US.

AIP has stood the test of times over the past three decades, becoming one of the largest fixed income funds in the world^. Its proven track record attests to its success in evolving with the market and adapting to cyclical changes.

^AUM: US$20.16bn as of 31 October 2023. Source: Lipper, AB. Based on Fund inception date: 1 July 1993.

Income

The Portfolio targets multiple sources of income
By pairing higher yielding credit with higher quality, more interest-rate sensitive securities, we aim to capture a steady stream of income with capital preservation

Balance

A minimum 50% of the Portfolio assets are invested in government and investment grade-rated (IG) bonds for stability*
The other half is invested in below IG securities such as high-yield corporate bonds and other credit assets to enhance income and dampen interest rate risks

Diversification

Issuers are picked from a variety of sectors in a bid to search for the best opportunities. Under normal market conditions, at least 65% of assets must be in securities issued by US entities
Having a multi-sector exposure also ensures there is less risk of the potential damage that a large drawdown, or spike in default rates, might have in any single sector

* IG bonds are considered less volatile and usually deliver a lower return than compared to US high yield bonds, which typically offer higher returns but with more risk

Fund Details

AB American Income Portfolio

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Portfolio Managers

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AB American Income Portfolio Brochure

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KEY RISKS TO CONSIDER

Country Risks in the US: Investments in issuers located in the US may have more market, political and economic risks because of particular factors affecting that country.

Credit Risk: The Portfolio will invest in fixed-income securities (including bonds) issued by companies and other entities and the Portfolio will be subject to the risk that a particular issuer may not fulfil its payment or other obligations in respect of such fixed-income securities. Generally, debt instruments with a lower credit rating or that are unrated are more susceptible to the credit risk of the issuers. In the event of a default or credit rating downgrading of the issuers of the fixed income securities, the Portfolio’s value will be adversely affected and investors may suffer a substantial loss as a result.

Derivatives Risk: The Portfolio is entitled to use derivative instruments for hedging and/or EPM purposes which may involve additional risks different from, and, in certain cases, greater than, the risks presented by more traditional investments.

Fixed-Income Securities Risk: The NAV of a portfolio invested in fixed-income securities will change in response to fluctuations in interest rates and currency exchange rates, as well as changes in credit quality of the issuer.

Liquidity Risk: The risk that arises when adverse market conditions affect the ability to sell assets when necessary. Reduced liquidity may have a negative impact on the price of the assets.

Important Information

The Portfolio is part of AB FCP I (referred to as “AB”). AB is a mutual investment fund (fondscommunde placement) organized under the laws of the Grand Duchy of Luxembourg. Prior to 5 February 2016, AB’s legal name was ACMBernstein, its trading name was AllianceBernstein.

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Past performance, historical and current analyses, and expectations do not guarantee future results.

Investment involves risk. The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date of this publication. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this publication. This document is for informational purposes only and does not constitute investment advice. AllianceBernsteinL.P. does not provide tax, legal or accounting advice. It does not take an investor’s personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by AllianceBernstein or its affiliates.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.