With Europe characterised by negative rates and subdued bond yields, Nick Maroutsos, Co-Manager of the Absolute Return Income strategy, explains how the team seeks to meet the objectives of an absolute return fixed income portfolio.

Key takeaways

  • Avoiding a home-country bias to investing widens the investment opportunity set and can help to uncover attractive risk-adjusted opportunities overseas that can potentially offer higher yields after currency hedging costs.
  • The team’s investment ideas are driven initially by macro determinants, particularly the direction of interest rates, which we anticipate to be supportive in 2020 as central banks remain in accommodative mode.
  • At a sector level, we favour financials, particularly bonds issued by monopolistic-type entities in Singapore and Hong Kong and the major banks in the US.

 

Notes
Duration: A measure of the sensitivity of a fixed income security or portfolio to a change in interest rates. It is expressed as a number of years. The larger the figure, the more sensitive it is to a movement in interest rates.