Unconstrained sub-category for fixed income
Ratings house Zenith has created a new “unconstrained” fixed interest sub-category in its 2014 Global Fixed Interest Sector Report released this week.
The move comes as fund managers are offering or are about to offer a growing number of new funds to the market, aimed at fulfilling perceived current or future fixed interest needs of investors.
“No longer will long-term rates be anchored as central banks look to remove stimulus from economies that are perceived to be recovering,” the report said.
“The volatility becomes more prevalent in credit markets, as emerging market debt returns become more idiosyncratic, with investors discerning between countries.”
Zenith said fund managers are creating fixed interest solutions that are better able to steer through the changing fixed income environment compared to traditional, benchmark-relative offerings.
They have removed the link to traditional benchmarks by adopting a cash (or equivalent) benchmark. They have also relaxed or removed many constraints, especially duration, sector and country limits.
Zenith does, however, note some risks. It said many of the strategies in this sub-category have relatively short performance histories, making it more difficult to rely on the manager’s ability to deliver on the strategy objectives over the market cycle.
The report also noted managers have chosen a master/feeder structure to launch the funds in the Australian market, meaning it adds another layer of complexity to the offerings.
Recommended for you
Bentham Asset Management has become the latest fund manager to expand its distribution team as it reports increased interest in its credit strategies.
L1 Capital, which is in talks to merge with Platinum Asset Management, has indicated it will be voting against a deal to convert a Platinum LIC into an ETF.
Evidentia Group has hired a head of quantitative investments who joins the investment firm and managed account provider from AMP.
Fidelity International has worked in tandem with Australian wealth manager Emanuel Whybourne & Loehr to launch an actively managed global equities strategy aimed at financial advisers.
