Absolute Return Global Bond Portfolio Strategies

Absolute Return Global Bond Strategies combines traditional and advanced approaches that fall into three main categories.

Click on the links below to see how each category works, with recent strategy examples:

Market return

How the strategy works
Market returns come from dynamic allocation between fixed income markets, selecting those that offer the best potential for returns at any given time and actively changing portfolio weights depending on the outlook for individual markets. We also aim to enhance returns through stock selection.

Strategy example
We favour credit given attractive valuations, lower for long interest rates, the ‘self-help’ steps taken by companies in the wake of the financial crisis and unprecedented government action.

Directional

How the strategy works
We take a view on markets and implement exposures that we would not systematically be rewarded for holding. They can be related to specific views on interest rates, inflation, foreign exchange or volatility.

Strategy example
In early 2011, we implemented a long position in Australian 10 year bonds on the basis that they have fully priced in the “China Story” but not taken into account likely economic headwinds of a stronger currency and rising interest rates. Therefore we think bond yields are too high and so this strategy will add positive returns to the fund as yields fall.

Relative value

How the strategy works
We take advantage of differences between markets where, irrespective of the overall direction of markets, we are confident that one market will do better than another.

Strategy example
In early 2011, the traditional relationship between financial credit and main credit had broken down. Financial credit typically trades at a premium to other bonds, but the euro sovereign crisis had hit financials particularly hard. In this instance, we would favour financial credit over corporate credit and when the relationship normalises our Fund will benefit from the realignment