Managing bonds lies in our genes, given that we have over 25 years’ experience in all aspects of it. The foundation is laid by our immunisation strategy, in which we create and actively manage an optimal combination of the four main components of bond returns – duration, spreads, yield curve and inflation linking. The fundamental macroeconomic research findings of our multi-award-winning analysts provide the starting point. The current position in the economic and credit cycles determines maturity, segment and industry weightings as well as the use of derivative strategies.
Active Bond Management
Our highly successful duration management is underpinned by our multi-award-winning economic research. The »Bantleon Leading Indicators« reliably anticipate the official barometers, allowing us to see macroeconomic trend reversals coming well in advance. Portfolio duration is generally above the benchmark figure in economic downturns and below it in upturns. The extent of this overweight or underweight depends on the fundamental backdrop, the technical situation and the overall portfolio orientation. The bottom line is that our duration management has regularly made a significant contribution to performance over several decades.
Corporate bonds and covered bonds are important building-blocks in institutional investors’ asset allocations. The weighting of corporate bonds within a portfolio is managed through a combined top-down/bottom-up approach. The top-down part is guided by macroeconomic analysis of the credit cycle, from which the sector strategy and portfolio weighting are derived. The bottom-up part, meanwhile, entails selecting attractive issuers and individual bonds. Depending on the phase in the credit cycle, this differentiated strategy can produce starkly contrasting results in terms of industry bias and bond selection. This straightforward bond-picking is complemented by an active rating and sector allocation process and the use of additional sources of performance. In some phases of the economic and credit cycles, investing in bonds with ratings below investment grade can additionally be an attractive proposition.
Management of inflation-linked bonds is essentially based on the overarching inflation expectation formulated by our economic research team. This trend forecast is compared with the inflation scenario currently priced in by the market. The divergence between the two results in a strategic assessment of the use of inflation-linked bonds. We also take account of the high correlation between investors’ inflation expectations and commodity price trends in the timing of our buy and sell decisions. If commodity prices are in a fundamentally/technically motivated uptrend, with the overarching inflation outlook signalling a rise in inflation rates, the allocation to inflation-linked bonds will normally be increased – and vice versa.
LCR bond management
We offer mutual funds and segregated accounts featuring management approaches aligned with the complex requirements of the liquidity coverage ratio (LCR). This allows us to meet the regulatory requirements very reliably while at the same time maximising returns through active management of duration, segment and rating structures. The result is a balanced portfolio with attractive, stable income and a high level of LCR eligibility.