Citywire Forecast: Four bond funds on wealth managers radars
We talk to four wealth managers to find out which funds they believe are best placed to navigate tough bond markets.
by Ross Miller
Posted 18 March 2021
Signia's Gregoire Sharma, Fixed income fund analyst, comments:
FINISTERRE UNCONSTRAINED EMD
The Finisterre Unconstrained EMD fund is a blended and dynamic emerging market debt strategy that has exhibited impressive performance across multiple market environments. The strategy combines an experienced EM-dedicated team, a well-established and proven differentiated process and a strong long-term track record.
The strategy's focus on risk management stands out not only in the investment process where the team constructs its portfolio by allocating to well-defined risk buckets which helps reflect its views on market cycle positioning, but also in the performance numbers. Indeed, the Finisterre fund proved its ability to navigate tough market conditions with downside capture ratios of less than 60% during the Taper Tantrum in 2013, 22% during the US Federal Reserve normalisation in 2018, and 64% during the Covid-19 crisis in 2020. All the while it has consistently captured most of the upside and generated material outperformance in each calendar year since inception, having finished 2020 up 8.1% with over 300bps of outperformance versus the JP Morgan EM Equal Weight index.
Emerging markets should still benefit from the growth of differential between EM and DM economies this year as despite the recent pickup in US real yields, we are still some way from tightening monetary policy from the US Federal Reserve. Therefore, picking a manager that can expertly pull all the levers at its disposal across all sub-sectors of EMD with such a strong focus on risk management makes sense.
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