What are you trying to achieve for investors and what role could your fund play in an investor's portfolio? How do you structure this fund?
The Nedgroup Investments Global Strategic Bond offers investors:
- Aims to offer investors steady returns in excess of the Bloomberg Global Aggregate by capturing opportunities across core global bonds.
- Risk and yield diversification away from domestic markets. To date the fund has delivered on average a yield above 5% in US$ terms.
- A complement to their equity exposure by avoiding currency risk and higher credit risk bonds such as AT1s and CCCs.
The fund is focused on harnessing interest rate and credit opportunities through a valuation-driven approach, benefitting from two seasoned managers who combine top-down macroeconomic perspectives and bottom-up credit selection for portfolio construction.
What are the big opportunities and risks for your strategy in 2025?
Ongoing uncertainty, deteriorating economic fundamentals and market volatility create opportunities for investors considering active management.
Pre-tariffs, all G7 economies ex Japan were slowing and expected to cut interest rates. Despite the bond market flipping from optimism to pessimism several times in the past two years, modest rate cuts were still anticipated. Japan, with a weak currency and full employment was likely to raise rates. However, the prospect of global tariffs has introduced significant uncertainty. This has sometimes led to a bifurcated market. For example, many foresee weaker growth and higher inflation in the US whereas outside of the US, both growth and inflation are expected fall. This suggests that meaningful intra-G7 bond market volatility may be a feature of the next 12 months.
For us, we prefer not to take heroic decisions and instead focus on our valuation-driven approach to avoid the troubled parts of the market and benefit from tactical price dislocations to achieve our objective.
Can you identify a couple of key investment opportunities you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level.
The strategy is defensively positioned for ongoing uncertainty regarding global tariffs and trade wars, and deteriorating economic fundamentals. For example, weaker leading macroeconomic indicators and over valuation of the primary corporate bond market provide reasons not to chase credit risk. Therefore, we have trimmed our credit exposure, preferring Europe due to more attractive fundamentals. We have also pulled back our exposure to US consumer-facing sectors as they are particularly vulnerable to a slowdown with already high leverage. While short-term volatility has declined, it has not gone away so the fund maintains meaningful exposure to short maturities.
