Portfolio strategies

We combine traditional and advanced approaches that fall into three main categories.

Market returns

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 longer 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
These strategies are cyclical market opportunities, so may not offer a significant long-term reward for holding them continuously. On a 2-3-year view, however, they can offer significant rewards that are often uncorrelated to long-term market returns.

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 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.