While the European bond market was setting records last week, the US market has also begun 2020 with a flurry of transactions backed up by record inflows.
Funds
Exposure to niche and less liquid asset classes inappropriate for open-ended funds.
The higher yields typically associated with, less liquid assets can deliver higher returns.
Earnings are distributed to shareholders through dividends at regular intervals.
Investors can trade shares on the open market.
Target attractive returns through steady, repeatable income and capital gain opportunities
Funds are predominantly long-only, unlevered, and simple to understand, with sparing use of hedging tools in response to specific macro events
A strong focus on the unwritten rule of fixed income - capital preservation at all times
Unconstrained strategy allows managers to tactically shift portfolio weightings, helping them to capture relative value opportunities as economic and market conditions change
Added value through both 'bottom-up' stock selection as well as 'top-down' macro calls
Investment grade bonds are widely held by institutional investors, so they tend to be more liquid and less volatile than lower rated bonds.
They offer higher yields compared to investment grade government bonds.
Relatively low default risk means investors can have greater certainty on expected returns.
The investment grade bond universe offers extensive diversification, with virtually every corporate sector represented in the global market.
Investment grade bonds have the potential to provide steady income
Closed-ended funds are professionally managed investment companies whose shares are publicly traded via an exchange.
Like regular open-ended investment funds, closed-ended funds invest in a portfolio of assets on behalf of investors.
In contrast to open-ended funds, closed-ended funds raise capital at launch via an initial public offering (IPO) of shares, which can then be traded by market participants on the open market without the direct involvement of the investment firm managing the fund.
This means capital does not flow directly in or out of the closed-ended fund when investors buy or sell the shares, giving the fund a more stable asset base that can be more appropriate for investing in less liquid markets and securities.
Closed-ended funds themselves do not issue or redeem shares on a daily or regular basis. They can only increase capital through portfolio performance, issuing debt, or conducting additional share offerings.
ESG issues can be a risk to fixed income returns like any other, and at TwentyFour we have embedded the assessment of these issues in our existing investment process and relative value models across the firm, with an integrated ESG framework used daily by portfolio managers for all strategies.
However, in recent years many investors have begun to consider sustainability a key element of their own investment objectives, and have sought products that specifically avoid investing in companies perceived to operate in an unsustainable way, either for their own business or wider society and eco system.
Unfortunately, especially within fixed income where ESG data availability can be poor compared to publically quoted equities, there are a range of definitions for and approaches to sustainable investing, and it is clear to us that many of these may not work for investors in the way they should.
There are some $51 trillion of fixed income bonds outstanding worldwide, comprising multiple geographies, currencies, sectors and types of security.
Multi-Sector funds should be able to control risk and harness reward through both ‘top-down’ macro calls and ‘bottom-up’ stock selection.
At TwentyFour, we believe the biggest advantage of a Multi-Sector strategy for our clients is the outsourcing of these ‘big picture’ decisions to the portfolio managers, who will shift positioning quickly in response to continually evolving macro and market views.
