Discretionary trading

Global fixed income

Investment strategy

Description

The Global Fixed Income strategy offers diversified exposure to fixed-income securities across various markets, geographies, and credit qualities. It aims to balance risk and return while providing a steady income stream. This strategy encompasses multiple sub-strategies, each targeting distinct sectors of the fixed-income universe.

Sub-Strategies

1. Money Market

  • Objective: Capital preservation and liquidity with minimal risk.
  • Instruments: Short-term debt securities such as Treasury bills, commercial paper, and certificates of deposit.
  • Investment Horizon: Typically less than one year.
  • Key Characteristics:
    • High credit quality and low duration.
    • Offers a safe haven during market volatility.
    • Provides steady, albeit low, returns compared to longer-duration bonds.

2. Government Bonds

  • Objective: Stability and consistent income with low default risk.
  • Instruments: Sovereign debt issued by stable governments, including U.S. Treasuries, UK Gilts, and German Bunds.
  • Investment Horizon: Short-, medium-, and long-term maturities.
  • Key Characteristics:
    • Low credit risk, backed by government guarantees.
    • Widely used for portfolio diversification and as a risk-free benchmark.
    • Sensitive to interest rate changes, particularly for longer maturities.

3. Corporate Bonds

  • Objective: Enhance yield by lending to corporations with varying credit qualities.
  • Instruments: Bonds issued by investment-grade corporations.
  • Investment Horizon: Medium- to long-term.
  • Key Characteristics:
    • Higher yields than government bonds, reflecting additional credit risk.
    • Performance influenced by corporate financial health and economic conditions.
    • Offers opportunities in diverse sectors and industries.

4. High-Yield Bonds

  • Objective: Maximize income through higher-risk debt instruments.
  • Instruments: Bonds issued by companies with below investment-grade ratings.
  • Investment Horizon: Medium-term focus, often paired with active management to mitigate risks.
  • Key Characteristics:
    • Higher yields compensate for greater credit risk.
    • More volatile, sensitive to economic cycles and default rates.
    • Attractive in periods of economic growth and low default environments.

5. Emerging Markets Bonds

  • Objective: Capitalize on higher yields and growth potential in developing economies.
  • Instruments: Sovereign and corporate bonds from emerging markets (e.g., Latin America, Asia, and Africa).
  • Investment Horizon: Medium- to long-term.
  • Key Characteristics:
    • Higher yields than developed markets due to perceived risk.
    • Subject to currency fluctuations, political instability, and economic volatility.
    • Diversification potential with access to fast-growing economies.

6. Convertible Bonds

  • Objective: Benefit from bond-like stability and equity market upside.
  • Instruments: Bonds with embedded options allowing conversion into equity.
  • Investment Horizon: Long-term, depending on equity market trends.
  • Key Characteristics:
    • Combines fixed-income characteristics with equity participation.
    • Lower yields than standard bonds, offset by conversion potential.
    • Appeals to investors seeking growth with downside protection.

7. Subordinated Bonds

  • Objective: Earn higher yields by investing in lower-ranking debt instruments.
  • Instruments: Subordinated debt (e.g., junior bonds, hybrid securities).
  • Investment Horizon: Medium- to long-term.
  • Key Characteristics:
    • Lower priority in repayment hierarchy than senior bonds.
    • Higher yields due to increased risk.
    • Often issued by financial institutions as part of capital structure management.

Core Features of the Global Fixed Income Strategy

  1. Diversification: Reduces risk through exposure to various fixed-income categories and geographies.
  2. Steady Income: Provides regular interest payments, appealing to income-focused investors.
  3. Risk Management: Balances risk through allocations across credit qualities, sectors, and maturities.
  4. Market Responsiveness: Adjusts for interest rate changes, inflation trends, and credit conditions.
  5. Portfolio Role: Acts as a stabilizer in multi-asset portfolios, reducing volatility and providing predictable returns.
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