Investment process

To uncover the most compelling investment opportunities in the global index-linked bond market, we have developed a hybrid investment process - one that combines quantitative research with broader qualitative assessments and market insights.

Our approach focuses on the four key factors that we believe drive returns in the index-linked bond market:

1. Economic fundamentals

We begin by determining the likely future path of inflation and interest rates, the two key variables that determine bond returns. This is where our team-based approach comes into its own; our global strategists and economists share their insights with the real returns team, provoking the debate and discussion that is essential to making informed decisions.

2. Value

To more accurately assess the relative value offered by the world’s index-linked bond markets we have developed our own, in-house quantitative modelling tools. These models help monitor our existing index-linked portfolios as well as being a testing ground for new investment ideas.

3. Sentiment

At times, market sentiment and the positioning of other investors’ portfolios can drive returns; investor psychology and inefficiencies can lead to overreaction, with prices pushed to overbought or oversold levels. By understanding how other investors have positioned their portfolios (and when they may become forced sellers or buyers) we can take advantage of changes in market sentiment.

4. Technical

We assess both long-term and short-term technical considerations. Long-term factors such as demographic changes, new legislation or alterations in the regulatory landscape can impact the supply/demand balance. In the short term, we use chart analysis to identify key resistance and support levels, which allows us to set price targets and stop-loss levels, and helps to establish rational entry and exit positions.