Michael Mabbutt, Fund Manager and Founding Partner
Fund: 1167 Capital China Government Bond Fund
G10 government bonds traditionally provided investors with a unique combination of positive yields, low volatility, and ballast for risky assets. Yet for many years now, they have struggled to deliver on these qualities – depriving investors of a critical tool in portfolio construction. The emergence of China as the world’s second superpower, however, has meant the arrival of a real alternative. With consistently positive yields, low capital volatility, and a proven record as diversifiers for global risk assets, China Government Bonds look set to be one of the reserve assets of the future, and a valuable addition to any portfolio.
Ardea, a Fidante Partner’s affiliate
Gopi Karunakaran, Co-CIO
Fund: Ardea Global Alpha Fund
The Ice Age in Bond Yields Doesn’t Have to Mean Frozen Returns
Bond yields and cash investment rates are near record lows and in some cases are negative. The outlook doesn’t look like changing in the foreseeable future.
The risk and return balance for traditional fixed income strategies has become unfavourable for many investors. Fortunately, there are alternatives that offer investors higher expected returns than cash, but with lower volatility and the benefits of diversification. One such alternative is Relative Value (RV) fixed income investing.
Ardea’s Global Alpha (AGA) Fund provides a solution for investors seeking alternatives to near zero or negative yielding cash and conventional government bond investments. It works as a defensive anchor to help navigate the ups and downs of markets, an uncorrelated source of returns or an alternative source of income with low volatility.
Dònal Kinsella, FIA, CAIA, Institutional Portfolio Manager
Fund: Eaton Vance Global High Yield Fund
Jon Mawby, Head of Investment Grade Credit
Fund: Pictet-Strategic Credit Fund
Managing fixed income risk in a reflationary environment
The past 40 years have been characterised by steadily falling inflation, and negative yields now account for large proportions of the investment-grade universe. Over the past decade, the duration of corporate bonds has been increasing while yields have been decreasing (see figure). “It looks like a crocodile’s jaws opening and, to my mind, I wouldn’t want my hand to be in there when it starts to snap shut,” says Jon Mawby, head of investment-grade credit at Pictet Asset Management. What happens if we get a regime shift from low-growth, low-inflation, long supply chains to shorter supply chains, higher inflation, and potentially higher growth? That would have tremendous repercussions for how you approach credit investment because it’s going to turn the last 40 years on its head in the way that people think about using credit products and think about risk management.
Paola Binns, Head of Sterling Credit
Fund: RL Short Duration Credit Fund
How differentiated security selection builds portfolio strength
Government bond yields rose significantly over the first quarter of 2021, amidst debate as to whether inflation will rise or stay within central bank parameters. Paola Binns, Fund Manager of the RL Short Duration Credit Fund and RLAM Head of Sterling Credit, will provide a guide as to how the fund withstood this pressure through a diversified approach, which differentiates it from peers in the market.
Paola will offer her views on areas of the market such as infrastructure type debt and where she sees value opportunities in the market currently. Paola will also explain her thoughts on the outlook for the sector and the direction in which bond yields may head next.