We believe our approach to value investing works well in the global fixed income universe, a reason why we have adhered to our process for more than two decades. Our top-down, macro-driven, value-seeking investment process identifies undervalued bond and currency markets with mean-reverting potential. This short video explains the importance of mean reversion to our macro research and overall investment philosophy.
We believe that changes in bond and currency valuations create feedback cycles, and serve as important economic regulators. Identifying bonds and currencies with mean-reverting potential is integral to our process. We take a moment to explain how bond and currency valuations create feedback cycles, and why this economic function plays a significant role in our investment process.
We outline the two distinct, yet integrated workflows that help our Global Fixed Income team identify attractive investment opportunities. Evaluating price risk and information risk is the crux of our process and guides our team in identifying where investment opportunities are being created around the world. In this video, we explain quantitative and qualitative analyses that go into identifying and evaluating price and information risk.
As part of our valuation framework, we think of currencies as a macro asset, meaning changes in their valuations effect the macro economy. We share the types of potential catalysts we look for, including the effects of a positive feedback cycle.
We review the trends that drive currency valuations over time, and focus on key themes that typically influence emerging market currencies. We then contrast these drivers with the factors that impact developed market currencies in order to explain the nuanced application of our valuation framework.
We explore an additional level of our fundamental currency analysis, which includes evaluating country-specific factors. While identifying broad macroeconomic themes is important to our process, understanding a country’s underlying fundamentals is an equally significant part of our currency valuation process.
Our investment process utilizes a variety of research methods, models, and metrics. Therefore, we look at a variety of metrics when it comes to currency valuation. We explain how metrics like purchasing power parity and real effective exchange rates are part of our decision making process.
The global bond universe offers diverse sources of alpha and the potential for superior returns compared to domestic fixed income portfolios. Since the asset class is also incredibly vast, we believe there are a number of ways to access the space; an investment manager with a time-tested process and a breadth of fixed income solutions is essential when navigating through global bond markets. We briefly explain how our approach to global fixed income encompasses an opportunity set of 30-40 markets using a range of strategies that can be tailored to clients' specific needs.
We think investors should look beyond traditional fixed income in order to achieve their return objectives. One way investors may achieve their goals is by considering an unconstrained approach to fixed income investing. Unconstrained investing can fall across a spectrum of capabilities, from benchmark-agnostic portfolios to incremental levels of manager flexibility, including long/short approaches. We explain our differentiated approach to unconstrained investing and outline our broad range of capabilities.
We have been managing our global fixed income strategies in a benchmark agnostic, unconstrained manner for well over 20 years. As a pioneer of unconstrained investing, we have evolved logical extensions of our hallmark approach over the years that offer enhanced manager discretion and different levels of flexibility. Watch an introduction to our suite of unconstrained fixed income solutions, and read our topical insight that provides an in-depth look at each of our unconstrained strategies.
The Global Multi-Sector strategy starts with our hallmark top-down approach to identify global sectors that may offer relative value. We conduct country, credit, and currency analyses to uncover valuation anomalies in these respective global sectors. We briefly explain how we go about analyzing each of these global sectors in our search to find relative value opportunities supported by solid or improving fundamentals.
After identifying relative value within the global sectors, our team screens for investment opportunities in sovereign bonds and credit markets in a systematic way. Our selection process concludes with deep-dive, fundamental research. We explain why a holistic investment process that combines top-down research, screens, and fundamental research helps us build a focused strategy that ultimately drives total returns.
The team looks for sources of alpha across different segments of the credit market, in addition to the regional and country levels. Watch Portfolio Manager Gary Herbert explain how the team identifies alpha opportunities and which historical allocations have previously generated performance for the strategy.
The Global Multi-Sector strategy evaluates risk on three spectrums: credit, country, and currency. The strategy’s overall goal is to avoid principal loss, and adheres to this objective by focusing on markets with significant valuation anomalies. Portfolio Manager Gary Herbert discusses each spectrum of risk management and draws upon previous examples to illustrate our three-pronged approach to downside protection.