Our bond investment process reflects the differences between government and corporate bonds. For government bonds we focus on top-down or macroeconomic analysis. For corporate bonds we look at bottom-up or microeconomic company analysis, while also taking into account macroeconomic research.
We conduct our government bond research in-house, taking into consideration industry data to develop internal views on economic growth inflation, interest rates and currencies. From this, we form a detailed position statement which outlines our 12-month economic growth and government bond yield forecasts for the major markets.
We then use this statement to derive a strategy for the four main drivers of bond portfolio outperformance – duration, yield curve, credit allocation to corporate bonds and, where appropriate, currency selection. We use any anomalies between our views and the current market price to position our funds for maximum performance.
Meanwhile, successful corporate bond investment comes from in-depth sector analysis and detailed bottom-up company research. It is also vital to understand the macroeconomic environment as this drives our view of which market sectors we believe are likely to outperform.
In turn, this influences our view of the relative attractiveness of corporate versus government bonds.
