Event Voice: Your Question Answered by Johann Plé at the Fixed Income Market Event

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Johann Plé, Axa Investment Managers
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Johann Plé, Axa Investment Managers

Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team? 

Strategy

A global and diversified solution, AXA ACT Green Short Duration Bond Fund (the Fund) focuses exclusively on 0-5 year green bonds. The strategy offers investors a solution that seeks to reduce exposure to climate change risks and invest in companies better positioned to seize opportunities in a low carbon economy. By concentrating on short-dated bonds, the Fund provides the benefit of the green bond exposure while ensuring a lower duration profile and lower volatility than the traditional green bond universe.

Investors also benefit from the Fund's access to transparent and measurable impact metrics and its alignment to the UN Sustainable Development Goals on environmental and societal issues. AXA IM is committed to ensuring transparency so investors receive a dedicated impact report with specific KPIs, and information regarding environmental project finance.

Investment Process

The investment process is based on our global and active fixed income process that has three main steps:

  1. Defining AXA IM key fixed income investment views for the upcoming quarter;
  2. Reflecting the ESG criteria and implementing our proprietary green bond framework;
  3. Building an efficient asset allocation over the global green universe using qualitative views and quantitative tools.

The outcome is a purist approach that focuses on green bonds and reflects four environmental themes: smart energy solution, low carbon transportation, green buildings, sustainable ecosystem, within a global aggregate profile.

Team

AXA IM's global fixed income teams are structured according to investment styles, reflecting our clients' investment choices. These specialised streams are all able to draw upon various shared resources, both within Fixed Income and around the broader organisation.

The Fund is managed by Johann Plé, the lead portfolio manager, and Li Rui, CFA the back-up portfolio manager. They work hand in hand with Responsible Investment analysts and fundamental credit analysts specialised by sectors.

How are you positioning your portfolio in uncertain times? 

The Fund's lower duration profile allows it to be well positioned for uncertain times. This is because bonds with lower duration have reduced sensitivity to interest rates versus the wider all-maturities market. At a time when interest rates are expected to increase, by investing exclusively in 0-5 year bonds, the Fund is able to offer investors a fixed income solution that not only reduces sensitivity to changes in interest rates, but also overall volatility.

In addition, the fund is managed actively so can dynamically utilise a wide range of performance drivers, from term structure management to asset allocation or geographical allocation. In uncertain times, this enables us to reduce the strategy's drawdown, and seize opportunities that arise with volatility. Hence, despite a cautious stance on credit, we have taken advantage of recent market conditions to allocate towards short-dated subordinated debts that provide attractive valuations. Earlier this year we reduced our exposure to emerging market debt but are now monitoring this segment as it provides attractive risk diversification benefits.

Can you identify a couple of key investment opportunities for your fund you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level. 

We believe the current environment is creating multiple opportunities in the market. Yet, the current uncertainty advocates for cautiousness. Hence, we are opting for a gradual approach to these opportunities.

The first one we identify lies with the term structure. We believe the Euro yield curve seems too steep compared to US or UK yield curves.

The second one lies within credit, which has significantly repriced since the beginning of the year. This provides attractive opportunities in the short-dated segment, which is usually less volatile.

In the same vein, we believe the sharp widening of the EUR swap spread makes the quasi-sovereign sector a defensive, yet quite attractive, allocation. In this context, agencies or government-guaranteed debts can provide a good opportunity to capture the current swap spread which stands at crisis levels.

Finally, we also monitor hedge cost dynamic, which is currently very favourable to holding euro-denominated debt when hedged back to sterling.

Click to learn more about AXA IM

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
 
The ESG data used in the investment process are based on ESG methodologies which rely in part on third party data, and in some cases are internally developed. They are subjective and may change over time. Despite several initiatives, the lack of harmonized definitions can make ESG criteria heterogeneous. As such, the different investment strategies that use ESG criteria and ESG reporting are difficult to compare with each other. Strategies that incorporate ESG criteria and those that incorporate sustainable development criteria may use ESG data that appear similar, but which should be distinguished because their calculation method may be different. This promotional communication does not constitute investment research or financial analysis relating to transactions in financial instruments as per MiFID (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents , which provide full product details including risks, investment charges and fees associated with the purchase of one of the mentioned products and risks. The information contained herein is not a substitute for those documents or for professional external advice.

The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. Please note that the management company reserves the right, at any time, to no longer market the product(s) mentioned in this communication in the European Union country by notification to its authority of supervision in accordance with European passport rules. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor's tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors. In the event of dissatisfaction with the products or services, you have the right to make a complaint either with the marketer or directly with the management company (more information on our complaints policy is available in English https://www.axa-im.com/
important-information/comments-and-complaints). You also have the right to take legal or extra-judicial action at any time if you reside in one of the countries of the European Union. The European online dispute resolution platform allows you to enter
a complaint form (https://ec.europa.eu/consumers/odr/main/index.cfm?event=main.home.choose Language) and informs you, depending on your jurisdiction, about your means of redress (https://ec.europa.eu/consumers/odr/main/?event=main.
adr.show2).

Issued by AXA Investment Managers UK Limited, a company incorporated under the laws of England and Wales with company number 01431068, having its registered office located at 22 Bishopsgate, London EC2N 4BQ.

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