Standard Life Investments

Ignis Absolute Return Government Bond Fund

The Absolute Return Government Bond Fund aims to provide positive investment returns on a rolling twelve months basis, independent of bond and equity market conditions.

The fund aims to achieve its objective within a target volatility of between four to six percent.  It is actively managed using a combination of assets (such as government bonds, foreign currency markets and money market instruments) and ‘derivatives’. In particular the fund will utilise strategies to actively manage interest rate exposure.

Derivatives are sophisticated investment instruments linked to the rise and fall of the price of other assets.  The fund uses derivatives to meet its investment objectives, for example, for short selling techniques (which are designed to make a profit from falling prices). Derivatives can create leverage, magnifying the effect of a change in the price of an asset, and in extremely adverse markets, when significant events such as the failure of market participants or certain financial instruments become difficult to trade, the leverage from using derivatives can magnify losses. Derivatives are monitored and controlled to ensure the fund is not exposed to excessive or unintended risks.

Investors should be aware that their capital is at risk and that there is no guarantee that the positive total returns will be achieved over the rolling twelve months or any time period. 

Overview

Diversification: takes long and short positions in the most important and liquid global government bonds and currencies. Returns are lowly correlated to traditional equity and bond funds. The fund has no corporate bond exposure.

Seeks positive returns in all market conditions: the fund is designed to provide investors with absolute returns (on a 12 month rolling basis).

Investment flexibility: the fund invests in derivatives on interest rates, currencies and fixed or variable interest government securities to reflect the managers' views. Non-Sterling currency exposure is limited to 25% of the risk budget of the fund.


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In this update for the Ignis Absolute Return Government Bond Fund, Shayne Dunlap, Ross Crawford and Tristram Miners-Jones discuss fund performance, positioning and give an overview of the team’s macro-economic outlook for the months ahead.