"Last year’s rise in U.S. interest rates created concern among investors that holding too large an allocation to fixed-income may result in lower overall returns in the coming year … Without having to incur higher volatility or lower expected returns, one option is to diversify a portion of a portfolio’s high-quality bond holdings into credit alternatives … Alternative strategies that hold both long and short positions in a variety of fixed-income instruments generally carry a net long bias to credit risk, but with little to no interest rate risk. We believe such strategies should outperform investment grade sovereign and corporate bonds this year and thus recommend including them in a diversified allocation."