PARTNER INSIGHT: Jonathan Platt, Head of Fixed Income at Royal London Asset Management, discusses why in a low interest rate environment fixed income is still suitable as the 'defensive ballast' of a multi-asset portfolio
Fixed income is facing something of a dilemma. Yields are lower but risks are arguably higher than ever. What steps can/should managers be taking in this environment?
Due to the level of indebtedness that still exists in the global economy I think we're going to be in this low interest rate environment for a little while yet. So in terms of the dilemmas facing bond investors, the question for us is: how can we best serve our clients in this low interest rate environment?
My view is that diversifying cash flow across different fixed income classes and bond issuers is key. We recently launched our Monthly Income Bond (MIB) Fund with this in mind, and it has exposure to well over 500 different issuers using a fund of fund structure. At Royal London Asset Management (RLAM) we are known for having expertise across government bonds, inflation linked, credit and high yield. We are perhaps best known for these last two areas and for favouring secured and asset backed bonds within our investment grade portfolios.
An all-in-one strategy
We already have a suite of funds that are income-orientated and have demonstrated consistent outperformance versus their benchmark. So we wanted to bring these funds together and offer our clients the diversification of having exposure to these portfolios, but also provide them with exposure to the managers of these funds who are some of the most experienced in the business when it comes to income-orientated strategies.
For example our colleague Eric Holt, who has been managing credit bond portfolios for over 35 years, runs our Sterling Extra Yield Bond Fund. We launched a more global version of that fund three years ago, our Global Bond Opportunities Fund, which is run by Rachid Semaoune. In addition to that, Azhar Hussain manages our Short Duration Global High Yield Bond Fund. 75% of the MIB assets are in these three funds so they will form the core of the portfolio.
Click here to learn more about RLAM's flexible fixed income approach.