Fighting fit in global flexible bonds

There is no doubt that the unconstrained approach to fixed income investing has captured investors’ minds in this low-yield and uncertain rate environment. It is viewed as a strong way in which to counteract vulnerability to rising rates and the loss of portfolio returns from the lack of diversification.

Having an allocation to flexible bond strategies may help investors to better position for these market nuances and can make a portfolio more robust, as well as increasing yield position if the right strategy is chosen.

But, who is proving a powerful outperformer in this specialist area? In this gallery, Citywire Investment Research showcase the managers who have delivered strong absolute returns in the sector over the past five years in the Bonds – Global Flexible sector.

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Charles Melchreit of Pioneer sits in third position for his five-year absolute return in the Bonds – Global Flexible sector to the end of June. He manages the Pioneer SICAV Strategic Income fund in this peer group and has overseen it since August 2012.

Melchreit also manages the US-domiciled Pioneer Global Multisector Income Fund, which he has managed since its launch in December 2007. Kenneth Taubes and Andrew Feltus joined him on both of these funds as co-managers in 2013. The trio can invest anywhere in the world, including emerging markets, and their investments may be denominated in any currency. In June the Pioneer SICAV Strategic Income fund has 25.6% invested in covered bonds, 22.4% in non-financials and 11.2% in government bonds.

They also had an allocation to emerging governments and emerging financials. The current yield on the portfolio is 4.04% and current effective duration is at 4.71 years. Over the past five years, Melchreit returned 31.36% in the sector while the average manager returned just 13.05% in US dollar terms.

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Taking second place on a five year absolute return basis in the Bonds – Global Flexible sector is Jupiter’s Ariel Bezalel. He has run the Jupiter JGF Dynamic Bond since May 2012. Bezalel can invest a significant portion of the fund in high yield bonds, investment grade bonds, government bonds and convertible bonds.

His current strategies include his like for US treasuries, Australia and New Zealand in government bonds but dislikes the German 10-year bund, Japanese governments bonds and also the French 10-year OAT.

Within broader credit themes he currently likes Japanese convertibles and gold mining convertibles and dislikes Long duration credit. Bezalel is currently taking a cautious stance and is finding selective opportunities in emerging markets. Over the past five years, Bezalel returned 36.32% in the Bonds – Global Flexible sector. In comparison, the average manager returned 13.05% over the same five-year period to the end of June, in US dollar terms.

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H2O Asset Management’s Bruno Crastes has the best five-year total return in the Bonds – Global Flexible sector. He manages the H2O Multibonds fund and implements a highly responsive management strategy in an international universe that can invest in sovereign debt, investment grade credit, and high yield and currency markets.

At the beginning of the year he went against market consensus and bought Italian, Portuguese and Greek bonds, which were all hit by election nerves. In the second quarter of 2017, Crastes sold US and UK government bonds, which he thought would be hit by higher inflation and bought bonds within other areas of Europe.

Over the past five years, Crastes has returned of 148.68% in the Bonds –Global Flexible sector separating him from the pack as the best performer in the sector by a considerable distance.

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