Allspring Global Income Fund: Why Flexibility Matters

Hannah Rosencrantz: Hi, Noah. Hard to believe it’s been almost two years since we launched the Global Income UCITS (Undertakings for Collective Investment in Transferable Securities) Fund. On the eve of its second anniversary, what stands out most to you about the market environment and the key developments that have shaped the fund over the last year?

Noah Wise: This last year was a great example of why flexibility matters in fixed income investing. Investors had to navigate inflation concerns, rising geopolitical risks, fiscal uncertainty and continued investment in an AI (artificial intelligence) and digital infrastructure. Throughout all of this, though, credit spreads remained relatively tight against that growth backdrop that proved more resilient than most expected. The rates picture was much less benign as shifting inflation dynamics and a relatively broad hawkish repricing across many major central banks contributed to meaningful volatility across global bond markets. Overall, it was an environment that demanded continuous reassessment rather than a static market view.

Hannah Rosencrantz: So, Noah, you mentioned the range of inflation-related geopolitical and monetary policy developments that have really kept investors on their toes so far this year. Can you speak to how our team's six-month investment horizon really allowed us to navigate such a complex environment?

Noah Wise: Of course. Our six-month investment horizon keeps us focused on the opportunities and risks most likely to matter over the next couple of quarters and frees us from having to rely on a single, longer-term macro call, something that we believe has become increasingly difficult to get right. We began the year assessing healthy fundamentals alongside tight valuations across spread sectors. As we moved into March of this year, the onset of the conflict in Iran produced a sharp energy shock, pushing sovereign yields higher as investors prioritised inflation risk and reconsidered the likely path of monetary policy. Credit spreads, though, remained relatively orderly. But the dislocation we saw in rates markets, both in the US and globally in developed markets, was much more pronounced. This dynamic has largely continued as rates markets have remained highly sensitive to the developments in geopolitics, inflation and monetary policy, resulting in continued volatility in the fixed income markets. This dynamic environment has necessitated a nimble approach focused on disciplined risk-taking and flexibility—natural outgrowths of our six-month horizon.

Hannah Rosencrantz: So, as our team adjusted to these changing conditions, can you speak to how that translated to positioning?

Noah Wise: As we discussed, rates markets have experienced much more volatility than we've seen in credit. Naturally, that's also where we've been finding more opportunities. We've been tactically trading duration, recently finding opportunities to add due to what we view as a more attractive balance between prospective income and downside risk than existed just earlier this year. Distinctively, we've remained unbiased and avoided making large directional bets on rates and what we would characterise is more of a trading environment, not a high-conviction macro one. Within credit, historically tight spreads have favoured a judicious up-in-quality approach, emphasising strong sources of relative value and diversified sources of income. Securitised assets continue to be a good source of high-quality carry in this environment, particularly following recent underperformance that's improved their relative value compared to many corporate credit alternatives. More broadly, diversification remained a key focus, given our multiple lever approach, and proved especially valuable amid the significant market shifts we experienced over the last year. We were able to capitalise on opportunities that emerged across global rates markets and select spread sectors throughout the year. Our ability to adjust exposures as opportunities evolve remains one of the key advantages of our flexible global approach.

Hannah Rosencrantz: So, looking ahead, can you summarise our team's outlook as the Global Income Fund enters its third year?

Noah Wise: We're ending the year with a stronger income foundation, but with little room for complacency. Elevated government borrowing, persistent inflation concerns, geopolitical risks and heavy corporate issuance may continue to drive volatility and uncertainty in the markets. That backdrop, coupled with tight valuations across many spread sectors, warrants a focus on high-quality carry, disciplined security selection and liquidity. It also reinforces the importance of the flexibility built into our process, and we remain prepared to capitalise on volatility that creates well-compensated opportunities. With higher starting yields than we've seen in almost two decades providing a compelling foundation for future returns, we remain very constructive on fixed income and the opportunity set that lies ahead of us in the third year of the Global Income Fund.

Hannah Rosencrantz: Agreed. Looking forward to year three.