Neuberger Berman’s Adam Grotzinger on high-yield investing, rates, and the greenback

Investors should position for two interest rate cuts this year from the US Fed and more in 2026 as growth in the world's largest economy slows, according to Adam Grotzinger a senior fixed income portfolio manager at Neuberger Berman. 

Grotzinger, who runs Neuberger Berman's Strategic Income Fund, expects 100 basis points of total cuts from the Fed and says rate cuts should prove a tailwind for shorter dated bonds.  

Speaking to Livewire in Sydney, he suggested longer dated bonds may not attract as many buyers given uncertainty about the outlook for inflation. 

"We're buying treasuries, the front-end of the curve," Grotzinger tells Livewire. "Like a 2-year treasury a 5-year treasury. Why? Because those parts of the curve have a strong pull factor from ultimately where monetary policy is going to land, which is a Fed that's more dovish. 

"So the expectation is around the Fed doing more and faster. The front end is anchored by that and we feel a lot of confidence in that. The long end is where you've greater boundaries of uncertainty in addition to some support by what you expect from the Fed."

Inflation to ease 

Based in Chicago, Grotzinger has been with Neuberger Berman since 2015 and has worked as a senior portfolio manager on the Strategic Income Fund since 2019. 

For investors, the fund targets high income paid monthly by owning a portfolio of largely investment grade bonds across global fixed-income markets. 

The fund actively invests seeking out value in the bond market to make money for investors for income and capital appreciation, with a strong focus on downside protection. 

The fund currently yields just under 6% gross of fees, slightly down from highs closer to 7% in recent years, according to Grotzinger. 

One driver behind, the portfolio manager's belief that short-term rates will ease over the next 12 months is that he sees inflation under control in the US, as recent strength in the jobs market eases. 

"We might see some volatility in core goods inflation, but the services component of inflation should behave and go in the right direction of less versus more," says Grotzinger. 

"And then employment. The employment market's clearly softer and it continues to soften versus the previous years. And with the Fed's dual mandate of inflation and employment, I think those factors will enable them to take the policy level down to be less restrictive than it is today."

Opportunities in emerging markets, US dollar

Grotzinger adds that he believes an extension of the interest rate cutting cycle in the US into 2026 means the US dollar could face some more short-term weakness. 

"I'd say we're a little more tactical on that. We recognise the [US] dollar's fallen a lot in a pretty short order of time and so we've taken a few chips off the table on overt dollar weakness trades," says Grotzinger. 

On the softening US dollar theme, the portfolio manager also explains how emerging market debt priced in local currencies also remains an area of key interest for the fund. 

However, recently the Neuberger Berman team has tactically reduced some of its dollar-weakness trades, following the greenback's rapid fall in the first half of 2025.

Beyond international currency movements, the likely easing of benchmark interest rates in emerging market economies is also attractive to Grotzinger. 

“There’s not a lot of inflationary pressure and their policy rates in many cases are too high,” he says. 

As such the portfolio manager says selective emerging market debt is still attractive for high yields, as it has twin potential tailwinds from appreciating emerging market currencies versus the US dollar, and the potential for easier financial conditions in issuer nations. 

If you want to learn more about the Neuberger Berman Strategic Income Fund and its approach to income investing watch the full interview. 

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