Short duration strategies are typically constructed around a single geographical region and currency. However, in our opinion, a wider range of opportunities can be unlocked with a global remit encompassing various time zones and multiple currencies.
Short duration strategies focused on credit of up to three years in duration operate a step further along the yield curve compared to money market funds, yet retain many characteristics of liquidity products, including the ability to navigate risk.
Short duration credit can potentially offer higher yields and greater return potential than cash and money market investments due to its longer maturity profile. While its shorter-duration focus may help reduce sensitivity to longer-term market uncertainties, investors remain exposed to credit, liquidity and market risks.
In the likely event that ongoing geopolitical turmoil, on top of the ever-present risk of idiosyncratic events, drives market volatility in the coming months and years, the case for the asset class is likely to remain strong into the medium term and beyond.
A Global Approach
The Federated Hermes Global Short Duration Strategy invests across investment grade, sovereigns and corporates, trading in multiple currencies including the US dollar, euro and sterling, potentially allowing an element of arbitrage to capitalise on opportunities that may arise between currencies and maximise overall returns.
Fluctuations in inflation data across the world have exacerbated divergence in monetary policy at leading central banks, creating opportunities for a global investor.
Our strategy incorporates global building blocks covering various asset classes to structure and balance the portfolio and aims to generate a competitive advantage in terms of performance. The investment universe encompasses around 23 countries, including emerging markets, providing more opportunities to source alpha.
Currency Opportunity
The strategy's global approach allows the team to leverage so-called home bias. Many investors are more comfortable with credit issued in their domestic currency, which can sometimes be more expensive on a relative basis.
A company's assets can be priced differently depending on the currency in which they are denominated. An issue by a US bank may be cheaper to buy in euros rather than dollars, while an issue by a French bank may be cheaper to buy in dollars rather than euros and then hedge back.
The strategy has access to a wide range of products from around the world and is able to track these nuances and arbitrage differences with the aim to maximise overall returns.
A Global Team
Federated Hermes Global Short Duration Strategy is run by teams based in the US and the UK that have more than 100 years of combined experience running global ultrashort, US short duration and securitised asset strategies.
Ihab Salib has managed global short duration portfolios for more than 25 years for Federated Hermes. Nick Tripodes has worked at Federated Hermes for more than three decades and has been an analyst and portfolio manager on US dollar low duration strategies for 22 years.
Other members of the team include John Polinski, Andrew Lennox and Yulia Di Mambro. The team is integrated within the broader fixed income team at Federated Hermes and can draw on a broad range of expertise to support international investment.
Learn more about Federated Hermes Global Short Duration Bond strategy.
The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. The views and opinions contained herein are those of the author and may not necessarily represent views expressed or reflected in other communications. This does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.
Issued and approved by Hermes Investment Management Limited ("HIML") which is authorised and regulated by the Financial Conduct Authority. Registered address: Sixth Floor, 150 Cheapside, London EC2V 6ET.
