Commentaries
14 December 2020
November 2020 - Low yield does not mean lack of opportunities - Tactical Fund Manager's Comments
In a world where interest rates have been heading towards zero, the view that opportunities are linked to the level of yield is somehow a misconception. Investors were better off remaining invested in fixed income, rather than staying on the sidelines, despite volatility phases. To better illustrate this point, the below chart compares the level of yield registered at the beginning of each year to the annual performance of global fixed income indices in that year. It appears that the performance for both Global Aggregate Credit and Global Aggregate indices has been higher than what is suggested yield in most of the cases since 2009. Bloomberg Barclays Global Aggregate Index TR USD Hedged produced an average return of 4.29%, while the average yield at the beginning of the year was at 2.12%.
Global Bond Indices – Yield vs Return
31.12.2008 – 30.11.2020
Source: Bloomberg, RAM AI, as of 30.11.2020
One might be tempted to draw the direct conclusion that the only reason lies in the fact that we went through an exceptional period of central banks’ interventions. Nonetheless, developed markets monetary authorities have made it clear that this situation won’t change anytime soon. We shouldn’t be fooled by stopping the analysis at this stage as we all know that such actions/statements do not immunize investors from volatile market phases. In that respect, we strongly believe our four core principles enable us to efficiently navigate choppy periods while participating to the upside in global fixed income markets.
RAM Global Bond Total Return Fund, which is a flexible investment solution with a quality bias, integrating liquidity considerations throughout its investment process, has been producing an annualized return of +4.98% in the last 3 years (Class B USD), with a volatility of 2.80% and a Sharpe ratio of 1.14. The behavior of the fund during Q4 2018 and Q1 2020, and its ability to rebound, clearly evidences the capital preservation philosophy applied. The following drawdown analysis highlights shallower losses compared to an Investment Grade tilted global credit index.
Cumulative Drawdown
RAM Global Bond Total Return B USD vs Barclays Global Aggregate Credit Index
30.11.2017 – 30.11.2020
Source: Bloomberg, RAM AI, as of 30.11.2020
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