Bob Jolly , manager of investment funds in one of the best fund managers Fixed Income world, explains in the following interview , there are advantages when investing in the Fund: Schroder ISF Strategic Bond .
Jolly Bob began his career in the investment industry in 1982 . He joined the team Fixed Income at Schroders in September 2011 as Head of Global Macro . Prior to joining Schroders, Bob worked for UBS Global Asset Management as head of Foreign Exchange, Fixed Income and Debt UK Global Sovereign. He developed most of his career at Gartmore Investment Management, where he held the following positions: 1982-1989 Global Fixed Income Manager and UK, 1989-2000 Head of Fixed Income Structured, 2000 – 2005 Head of Construction of Fixed Income Portfolio e mong Gartmore and UBS Bob spent two years with SEI Investments developing solutions tailored for institutional pension funds. Bob is CFA Charterholder
The Fed has indicated to markets its intention to launch in September a plan to reduce asset purchase (reducing the liquidity injected into the economy through its quantitative easing program) and the market already reflects this news . However, the chairman of the Fed and others likely to maintain low interest rates in the committee members have worked hard to highlight the difference between this reduction program and a rise in interest rates and the interest rates short term remain low for a long time . As a result, we have seen an increase in the slope of the US yield curve, as short – term rates remain anchored while long – term yields have increased. We agree that reducing the program of asset purchases will occur before the end of the year, but keep in mind that decisions still depend on economic data and due to the disparity data from the second semester States States, the debate is now focused on the proportion of the reduction. Looking at the long end of the curve, although the Fed has so far shown positive with increasing the yield curve since June 2013, he does not want the curve is as steep as to be become an obstacle for borrowers and thus slow down the economic recovery. The possibility of increased volatility in the field of rates is causing the team Schroders find tactical opportunities when trading with exposure duration .
The beta bond market has been an important catalyst performance over the last 30 years , as US Treasuries to 10 years have fallen from its peak of 14% in the early 1980s to its current level of around 03.02%. In this context, the performance of actively managed bond has been overshadowed by the performance of indices (beta bonds). Looking ahead, we believe it is unlikely that the beta bond market investors continue to offer such high returns. Meanwhile, volatility is likely to be much higher, which is bad news for bond investors passive and limited by the benchmark indices funds. However, the volatility is good news for alpha generators . For investors focused on total return bonds, this is a perfect setting to apply absolute return strategies, such as the Schroder ISF Strategic Bond .
The fund seeks the best opportunities throughout the universe of global fixed income . The ability to invest in government bonds and corporate debt (both developed and emerging markets), corporate high yield bonds, currencies, mortgage and derivative securities , provides important diversification, flexibility and opportunities to generate excess return .
The fund seeks to generate alpha by taking advantage of opportunities presented by types, currencies and corporate debt . The allocation of risk budget to these factors is dynamic and the assigned amount may increase or decrease as a result of our analysis .
Regarding the duration , for example, we expect the market noise causes movements in the profitability of public debt and present tactical opportunities, both on the long side and the short side. We have been exposing the duration of the initial part of the yield curve in Europe, and we think the market has already discounted rate rises although it is unlikely to occur given the economic outlook for the euro area. Meanwhile, we are negative, and therefore have a short exposure in US Treasuries to 10 years, as we expect the US economy continues to improve . Valuations in the corporate debt market does not seem particularly attractive compared with its historical trajectory. However, regardless of the reduction program of asset purchases by the Fed, we are in an environment of abundant liquidity, low interest rates and prospects of low inflation ahead of a given magnitude of output gaps near future. As a result, cash will probably not attract the interest of investors and corporate debt markets continue to be driven by the search for yield. We continue to apply a thematic approach to identify the issues most interesting corporate debt. In a difficult environment for corporate debt generally we thought that a prudent selection and based on a rigorous analysis will be rewarded.
With regard to currencies , we are long on the US dollar and we have a short exposure to the Japanese yen and the euro . Among our past positions , there is a long position in the Indian rupee and Russian ruble . Also, we recently initiated a short position in the Chinese yuan .
For passive investors will be difficult. Contrary to recent years, when investors could simply have exposure to the bond market and sit back and watch came profitability, it is clear that nobody is going to get rich investing with a passive approach to fixed income in the near future. Beta bond market is dead , but for investors like us, thanks to our Schroder ISF Strategic Bond can invest tactically and strategically throughout the universe of global fixed income and foreign exchange, this is a market abundant opportunities to generate alpha . The fixed income team at Schroders is large and offers me the opportunity to use the skills and expertise of over 100 investment professionals worldwide. This gives us a considerable advantage and allows us to take every opportunity available: positioning duration, country allocation, positioning on the yield curve, corporate bonds, currencies and emerging markets.
The Schroder ISF Strategic Bond uses the LIBOR three – month rate as benchmark . Therefore, the neutral position of the fund in terms of risk is effective and, consequently, will have a significant portion of its assets invested in cash equivalents assets to achieve those results (for example, certificates of deposit, commercial paper and obligations floating rate). The risk budget is realized from such neutral cash position to whatever sources of alpha we think will serve to address the investment objective. Any position to be taken from this neutral position is defined alpha. In other words, the Schroder ISF Strategic Bond is a fund purely alpha . In addition, since the fund is implicit reference cash is a tendency to absolute performance, and sensitivity to drawdown (maximum fall) is an important part of the gestión.Este approach may be different from other flexible strategies taking as reference bond indices and, therefore, have a profile more similar to bonds profitability .
The fund management team follows the philosophy that sustainable alpha generation is achieved through talent and diversification . The diversification is achieved through different sources of alpha and investment horizons . The team actively manages the fund using a risk budget strategy, spreading the risk between positions where there are price misalignments to justify an allocation. To determine these imbalances, we use fundamental analysis along with a sound technical analysis. Diversification of portfolio positions are carefully made using a combination of risks including protection positions cost efficient. The management team appreciates the local market knowledge and relies on the experience of regional fixed income specialist Schroders to seize the opportunities of the wide range of alpha sources internationally .
The fund is managed by me ( Bob Jolly ), responsible for Global Macro , and Gareth Isaac , senior portfolio manager multisector . Both support us in the multisector team Schroders, which has over 130 investment professionals worldwide, including managers, more than 30 analysts corporate debt, 2 economists and 8 brokers. These extensive resources allow us to see all the opportunities in the world of global fixed income.
I joined Schroders in September 2011 as head of Global Macro, bringing my 30 years of investment experience. Before I worked for UBS as head of foreign exchange, fixed income and international British public debt.
Gareth entered Schroders in 2011 as senior fixed income manager. Before joining Schroders, Gareth worked as a manager at GLG Partners.
Yes, the fund actively invests in all asset classes fixed income .
Currently we have not any exposure to Spanish government debt . Previously we had exposure to the Spanish national and regional debt, including issuers as the city of Madrid, which offered an attractive yield differential against the debt. However, after the big rally that experienced debt markets of peripheral Europe so far this year, we took profits on these positions and reduced our exposure. Still we maintain selective exposure to high quality corporate bonds issued by some of the best Spanish companies.