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When selecting fixed income investments, we employ an active, multi-strategy approach. We combine both a top-down macroeconomic analysis on interest rate and yield curve as well as a bottom-up credit research with a focus 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 a change in interest rate expectations or; a change in risk premium of 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 analyzes the fundamental credit metrics of individual issuers. The security selection strategy provides the opportunity for investments in mispriced securities. - Non-index Strategies
We use different securities than what would be included in the bond index from time to time (including Floating Rate Notes, High Yield Bonds, US$ securities, Real Return Bonds, etc.).
Overall, we use 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 five strategies.
In keeping with our values, our priorities are safety of principal, income (yield) and 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 investments.
The expected outcomes of the strategy are competitive risk-adjusted returns and a low correlation to equities.
Find out more about our Asset Allocation investment process