As the price of oil plummeted last fall, sending markets whirling and anxious ears straining to hear the word “patient” fall from Janet Yellen’s lips, FA asked managers across the country what lay ahead for their bond portfolios in 2015. Most analysts, strategists and portfolio managers, though poised for a major shift in credit markets and rising interest rates, weren’t abandoning bonds. Many say that the era of the active bond manager is here, as is the moment for fund managers to shed the constraints of traditional benchmarks. And financial advisors, they say, should awake to the imminent return of significant risk in the risk/reward ratio they’ve enjoyed for so long.

TCW’s Bryan T. Whalen, CFA, a generalist portfolio manager in TCW’s U.S. fixed-income group, is confident that “the earliest liftoff” of the Fed’s rate rise for Treasurys won’t arrive until June. More immediately, Whalen was put off by the current cost of credit products, especially overpriced credit and high-yield securities.

“Across the board, we’re getting paid less to take risk in these markets,” says Whalen, whose group manages the TCW Total Return Bond Fund and the MetWest Total Return Bond Fund. The MetWest fund won the U.S. 2014 Lipper Fund Award for its 10-year performance among “core plus” bond funds.

“If oil prices stay down over the course of 2015, there’s a high probability we’ll see some of the names in default,” says Whalen. But Whalen says, as did Yellen, that extreme reactions to oil prices will probably be contained and turn out to be a major positive for consumer spending.

For the New Year, his team favors asset-backed and non-agency mortgage-backed securities. “Non-agency MBS offer good fundamental value today on both an absolute basis as well as relative to other sectors of the fixed-income market,” he says. “They offer decent yields and some price appreciation potential. We find value in higher quality ABS as defensive securities that offer minimal price upside but are safe, liquid investments at a reasonable yield relative to Treasurys.”

One type of ABS Whalen likes is senior, floating-rate instruments secured by student loans guaranteed through the federal government’s Federal Family Education Loan Program (or FFELP).

“We think it’s crucial for investors to diversify their yield curve exposure by investing abroad,” says Chris Diaz, head of global rates for Janus Capital and the portfolio manager of the Janus Global Bond Fund, a multisector fund that seeks risk-adjusted returns and capital preservation. He is focusing on areas where the European Central Bank is expected to start large-scale bond buying, similar to the program the U.S. is winding down. The fund in December had a 55% weighting in Europe.

Diaz is finding an array of opportunities on the continent that maybe global investors consider calcified, including European nations that have struggled such as Spain, Portugal and Ireland, “where restructuring was quite painful, but there has been a greatly improved economic outlook,” says Diaz. At the same time, he is also invested in core European countries like Germany and France. “I’m not suggesting that the euro crisis is over, but it’s much improved since the 2012 period.”

The team favors European sovereigns and corporate bonds, largely in the financial sector. The fund’s flexible mandate will allow the team to increase its emerging markets weighting up to 30% when prices and yields become more attractive than they are today. The weighting is nearly zero now.

In his own outlook, Diaz wrote, “Once rates start to rise, it’s difficult for a fixed-income portfolio to make up lost ground if it’s not already positioned for higher rates. We think it’s crucial for investors to diversify their yield curve exposure by investing abroad.” He tells Financial Advisor, “The important areas for getting 2015 right won’t come from what we own, but what we do not own.”

Something new for Janus this year is the presence (albeit distant) of Bill Gross as the firm’s new EVP. Gross, the recently departed CIO of Pimco, will work in Newport Beach, Calif., instead of Janus’s headquarters in Denver.

Anthony Valeri, an investment strategist for LPL Financial, is anticipating a flat-return environment in 2015, so he’s looking to high-yield bonds and bank loans for growth. “The loans yield 4.5% or so and offer no interest rate risk,” says Valeri. Most of the loans are by corporate borrowers looking for short-term lending. “Lower-rated bonds can help investors manage a challenging bond market,” he says. He’s interested in good corporate fundamentals and low default risk for the 3% to 5% allocation.