We consistently follow a rigorous, process when we pick fixed income investments for our funds. Our investment process employs an active, multi-strategy approach, combining both top down macroeconomic analysis on interest rate and yield curve as well as bottom up credit research focusing on undervalued securities and sectors.
Top down Macroeconomic analysis
- Interest Rate Anticipation:
The single most important factor affecting fixed income market is the interest rate. Our interest rate anticipation and duration strategy is supported by the vigorous research on the business cycle and the outlook for interest rates.
- Yield Curve Management:
The change of the shape of the yield curve can be caused by either the change of the interest rate expectation or; the change of risk premium for holding certain bonds. We carefully monitor and actively manage the portfolio's exposure to the yield curve. Bottom up credit research
- Sector Allocation
An active sector allocation strategy involves identifying and allocating assets in the sectors that might perform best under the possible interest rate and credit scenarios.
- Security Selection
The team analyze the fundamental credit metrics of individual issuer. The security selection strategy provides the opportunity for the investment in mispriced securities.
- Non-index strategies
We use different securities than what would be included in the bond index from time to time (including FRN's, High Yield Bonds, US$ securities, Real Return Bonds, etc.)
Overall, we employ a diversified style, whereby we emphasize different strategies depending on the market environment. Typically interest rate anticipation and/or sector selection have the most impact in terms of the 5 strategies.
Portfolio Construction Priorities
In keeping with our values, our priorities are 1) safety of principal 2) income yield and 3) moderate capital appreciation.
Once we have completed our top-down and bottom-up analysis, we carefully select individual fixed income securities for our funds. By only selecting investments with the right safety and return characteristics, we are able to protect and build your investments.
The expected outcomes of the strategy are competitive risk-adjusted returns and a low correlation to equities.