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Allianz Strategic Bond
Managed by Mike Riddell, the positioning of Allianz Strategic bond fund is driven by the team’s macro view. Mike believes most strategic bond funds masquerade as high yield bond funds and, as a result, have a high correlation with equities. This fund is very different and is all about looking at the bigger picture. Mike is not afraid to radically alter the fund quickly and this flexibility allowed him to quickly re-position his fund going into - and during - the coronavirus crisis, delivering spectacular results.
Our opinion
This a flexible strategic bond fund managed by an experienced manager who helped design the fund before launch. What has been particularly pleasing is that as well as exhibiting strong performance, any drawdowns have so far been small. The fund has low correlation with equities and therefore is one of the few strategic bond funds to offer genuine diversification.
Company description
Allianz Global Investors (AllianzGI) is an investment division of Allianz Asset Management AG, a wholly owned subsidiary of Allianz SE, one of the world’s largest financial services providers.
AllianzGI employs over 700 investment professionals in 23 offices worldwide and manages GBP 556 billion in assets for a mixture of both retail and institutional clients, across equities, fixed income, multi-asset and alternative investments. Fixed income is the largest portion, accounting for about £180bn of assets under management. AllianzGI was awarded the Elite Provider rating for Strategic Bonds in 2020 and China/Greater China Equities in 2021.
Fund manager
Mike Riddell has around 20 years investment experience. Prior to joining Allianz in 2015 he worked at M&G for 12 years. At M&G he worked with highly regarded managers such as Elite Rated Richard Woolnough and Jim Leaviss. Before that he worked at Premier Asset Management and has a broad experience in UK, global and emerging market bonds. Mike graduated from Birmingham University with a BSc (Hons) in Money, Banking and Finance, and is a CFA charter holder.
Investment process
When Mike joined Allianz in 2015 he had a blank sheet of paper to design a new strategic bond fund. Mike believes that most strategic bonds funds don’t live up to their name - that is, they are not strategic and in practice they are really credit funds usually dominated by corporate and high yield bonds. As a result these funds having a very high correlation with equities. Whilst they claim to be able to do well in any environment, Mike says in practice they will only do well when risk assets are in favour.
So he set out to design a fund that would be genuinely strategic. It is designed to have a low correlation with equities, offering a genuine diversification benefit to investors. The primary focus of the fund is the macroeconomic environment and interest rates. Credit is still a potential opportunity for value but is secondary.
The fund’s process starts with the global macro outlook. This is constantly changing, as the world moves and investors’ perceptions change. The team builds it outlook from a combination of global economic research, leading indicators, technical and asset class views.
Investment screens then identify mispricing and potential opportunities. The macro views then feed into the fund positioning including: interest rate exposure: yield curve exposure; credit exposure; inflation exposure; currency exposure and volatility exposure.
The goal is to implement views through asymmetric investment opportunities where they can make a lot but will only lose a little. These opportunities tend to be most available at times of volatility or change. The team is patient and happy to wait until it has very high conviction.
ESG
ESG - Limited
This fund has no specific targets or obligations regarding ESG factors. However, the managers do have access to the wider company’s research for reference and must adhere to the firm-wide policy of excluding any companies producing controversial weapons or violating either the Oslo or Ottawa conventions.
Risk
The fund is high conviction and its positioning can change very quickly as is to be expected given its philosophy and strategic nature. It can invest in emerging market bond and can also use derivatives. The portfolio is monitored with an array of analytics and the fund is stress and scenario tested to check its risk/reward. Whilst the fund has traded sideways for long periods, thus far it has done an excellent job of capital preservation and whilst it has delivered some very high absolute returns, the size of drawdowns has been limited.
Read more about this fund
The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.