The fixed income team, headed by Mark Nash, offers capabilities in multi-sector bonds (including both absolute-return and market-relative strategies), corporate bonds, including financials contingent capital bonds (often known as “CoCos”) and both local- and hard-currency emerging market bonds. The portfolio managers and analysts who specialise in these areas collaborate to share ideas on strategy, positioning and research – as well as developing a holistic view of the fixed income market.
This collaborative structure is pivotal to our investment philosophy that having specialists in each of the major areas of fixed income, who work closely with one another, is crucial to finding value in today’s increasingly interconnected markets.
Within multi-sector bond portfolios, our philosophy is to take an ‘all-weather’ approach, seeking to generate returns from interest rates, foreign exchange, credit, volatility and emerging markets. The managers place great emphasis on working within a centralised team, believing this brings the advantages of flexibility and coherence. The team offers both absolute return and market relative capabilities.
Mark Nash is portfolio manager and head of global bonds, while Nicholas Wall is a portfolio manager. They are supported by the wider fixed income team.
Global, absolute return, multi-sector/strategic bonds
The fund is intended for investors seeking a long-term, diversified, actively managed fixed-interest investment; the managers aim to generate a gradual rise in the performance over time, regardless of broader market moves. Investment is focused on government and corporate bonds and currencies, with an emphasis on highly liquid assets, giving the portfolio managers flexibility to express their convictions while supporting an emphasis on maintaining liquidity and preserving capital. The fund can ‘short’ the market, to profit when prices fall, in order to help achieve consistent positive returns through a variety of market conditions.
Contingent capital bonds, also known as contingent convertible bonds (or “CoCos”) have been a fast-growing asset class, and the increase in their issuance has been driven by regulatory change. CoCos were created in the wake of the great financial crisis of 2007-08, in order to increase banks’ ability to bear losses beyond their equity buffers, and regulators have encouraged issuance of the securities.
The managers believe CoCos have the potential to offer a yield in excess of that delivered by European bank equities, but with lower volatility. CoCos can also have low correlations with government and corporate bonds, and thus provide investors with diversification.
The fund managers aim to provide investors with a combination of income and capital growth from a portfolio primarily of CoCos. In managing the portfolio, they focus on selecting high-quality issuers, whose CoCos have a lower likelihood of conversion, in their view.
Although a large and highly liquid asset class, managing a portfolio of CoCos requires specialist knowledge. The fund’s managers, Rob James and Lloyd Harris, have a wealth of experience covering financials, combining expertise in both debt and equity. Lloyd is a member of the fixed income team, led by Mark Nash, while Rob is a member of the UK equity team, headed by Richard Buxton.
Contingent capital/contingent convertible bonds (“CoCos”)
The aim of the fund is to give investors access to a diversified portfolio representing managers’ views that takes advantage of opportunities in contingent capital bonds, also known as contingent convertible bonds (CoCos). The fund is managed in reference to the Bloomberg Barclays Contingent Capital Western Europe Index, but is not constrained by the index. The fund aims to provide investors with a combination of income and capital growth from a portfolio primarily of CoCos. The fund’s managers focus on selecting high quality issuers, whose CoCos have a lower likelihood of conversion in their view. The fund will typically look to invest at least 75% in CoCos, with up to 25% in a combination of equity instruments, collective investment schemes, cash, government or other bonds.