Rieder manages the $35 billion BlackRock Strategic Income Opportunities strategy (BASIX), which has offered investors 10-year average annualized returns of 3.98% and five-year average annualized returns of 2.21% as of May 4. The fund carries a 91 basis point expense ratio.

The strategy currently looks like a barbell, owning short-term U.S. Treasurys to control risk and emerging market debt to juice yields to create a consistent experience for investors over the long term.

While most central banks aren’t yet increasing rates, many are ending their purchases of government or corporate bonds as they pursue a policy of quantitative tightening. This increases the bond supply in the market, driving down prices and raising interest rates as a result, says Jeffrey Sherman, deputy chief investment officer at DoubleLine.

“I’m not saying tightening is going to cause a problem, but all these bonds have to find a home,” says Sherman. “That means it drives prices down and yields go up.”

Sherman currently co-manages the DoubleLine Flexible Income Fund (DFLEX), a $1.2 billion strategy offering one-year returns of 4.15%, more than three percentage points above the Bloomberg Barclays Aggregate Index. DFLEX carries a net expense ratio of 85 points for its institutional shares.

In DFLEX, DoubleLine focuses on short-duration, credit-sensitive assets to generate returns; 80% of its portfolio is allocated toward credit, while government bonds, agency bonds and mortgage-backed securities account for the remaining 20%. As the yield curve flattens, long-term bonds don’t yield that much more than those with shorter maturities, so investors aren’t compensated much for taking on duration risk.

Currently, the Fed estimates that its interest rates will not rise above the neutral rate until 2020, meaning that investors still have 18 months of relatively accommodative monetary policy acting as a tailwind for their portfolios. Because the impact of corporate tax cuts is expected to be a mostly near-term phenomenon, most of the response is being felt on the front end of the yield curve, says Sherman.

“Right now, you can get 206 basis points on the one-year Treasury bill,” he says. “That’s something you couldn’t do 18 months ago when the yield was 75 basis points. The idea is that the Fed, by raising rates on the front of the curve, is making short-term investing attractive because of the shape of the yield curve.”

Income can now be created with significantly lower risk than existed just 18 months ago, a phenomenon that many unconstrained managers believe will have significant impact on both debt and equity markets.

In the last half of April, the 10-year Treasury yield, used by many investors as the level of risk-free returns, crossed the crucial 3% mark for the first time since January 2014. As the front end of the yield curve creeps upward, investors like Rieder have found short-term Treasurys more attractive. The yield on two-year Treasurys recently crossed above the dividend yield of the S&P 500.