Partner Insight: What makes a strategic bond fund stand out from the crowd?

clock • 3 min read

We asked Mike Riddell, co-manager of the Allianz Strategic Bond Fund, what sets his fund apart

The goal that really differentiates us is correlations. We launched this fund in 2016, knowing that many strategic bond funds are heavily invested in investment grade and high yield corporate bonds, and therefore behave like equities to a large extent.

We wanted to create something uncorrelated to equities - a diversifier, a true bond fund. We are seeking a zero correlation between our fund and global equities, call it MSCI World, over a rolling 3-year period (not over every day or every week), but up to a target maximum of plus 0.4 over a 3-year period.

What else sets you apart?

Aside from correlations, two other goals differentiate us: flexibility and asymmetry. We have a lot of flexibility away from our benchmark, the Bloomberg Barclays Global Aggregate (FX hedged), whether that's being able to have half of the fund in high yield, if we think high yield is very attractive; use currencies that aren't in our benchmark; take positions in inflation markets, both long and short, around the world, that are not in our benchmark; and take yield curve and duration views, again meaningfully away from our benchmark.

Can you give a specific example?

For example, benchmark duration is 7.2 years. In theory we can be between zero and 12 years, and in reality we've been between 3.5 and 11 in the last 18 months or so. So we don't only have flexibility - we use it. The result is that we think we can generate alpha per year of around 200 basis points, though that is a goal and certainly not written in stone.

As for the third goal - asymmetry - put simply, when we're right we want to make more money than the amount of money we lose when we're wrong!

Click here to read how Mike and co-manager Kacper Brzezniak turn macro outlooks into investment strategy

Important Information

For professional investors only. Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. Allianz Strategic Bond Fund is a sub-fund of Allianz UK & European Investment Funds, an open-ended investment company with variable capital with limited liability organised under the laws of England and Wales. Past performance is not a reliable indicator of future results. Investment funds may not be available for sale in all jurisdictions or to certain categories of investors. For a free copy of the sales prospectus, incorporation documents, daily fund prices, key investor information, latest annual and semi-annual financial reports, contact the issuer at the address indicated below or www.allianzgi-regulatory.eu. Please read these documents, which are solely binding, carefully before investing. This is a marketing communication issued by Allianz Global Investors GmbH, www.allianzgi.com, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, 199 Bishopsgate, London, EC2M 3TY, www.allianzglobalinvestors.co.uk, which is subject to limited regulation by the Financial Conduct Authority (www.fca.org.uk). Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. This communication has not been prepared in accordance with legal requirements designed to ensure the impartiality of investment (strategy) recommendations and is not subject to any prohibition on dealing before publication of such recommendations.

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