How to generate income in a low-rate world was a major theme at the Morningstar Investment Conference in Chicago last week. Fund managers and strategists said that opportunities for yield exist but investors should be extra careful.
While the Federal Reserve is expected to raise rates later this year, that's not the case with the central banks in the Europe, Japan and the U.K.
"That should mean that there is opportunity to avoid big capital losses," JPMorgan Funds' chief market strategist, David Kelly, said. "There are slim pickings, I will admit. But I think there are better opportunities the further you get from the U.S. Treasury market."
You don't have to go overseas to diversify from U.S. Treasurys. Rick Rieder, BlackRock's chief investment officer of fundamental fixed income, told a Morningstar panel Friday that he liked municipal bonds because they are less correlated to Treasurys, which would fall in price as rates go up.
Rising rates offer a chance for bond investors to take advantage of the selloff. Marc Seidner, Pimco's chief investment officer of nontraditional strategies, said rising rates are great for bargain hunters. He compared buying bonds in a rising-rate environment to shopping on Chicago's Miracle Mile the day after Christmas.