BlueBay Investment Grade Global Government Bond

This is a core global government bond fund which gives investors access to active management at a very reasonable cost. The fund is targeting 1.5% outperformance a year versus its benchmark. BlueBay are fixed income specialists with a strong macro team and this fund looks to be a very interesting new option given the higher yields government bonds now offer.

Our opinion

This exciting new fund is supported by a very experienced and well-resourced team. It is a core offering with a clear strategy for delivering outperformance. The portfolio has a strong emphasis on capital preservation. This fund looks like a very solid option, and could be an interesting way of adding government bond exposure into a portfolio. Whilst government bonds are not traditionally thought of as an area where active management can add a huge amount of value, this fund’s initial outperformance has suggested otherwise. Furthermore, the fund’s low cost means it is not much more expensive than a passive alternative, and makes it much easier for this strategy to deliver outperformance after fees.

Fund manager

Mark Dowding joined BlueBay in 2010. He started his career in 1993 and previously worked at Morgan Grenfell and Invesco. Prior to BlueBay, he was head of fixed income in Europe for Deutsche Asset Management. Mark is now Chief Investment Officer at BlueBay. He has over 30 years of investment experience.

Kaspar Hense joined BlueBay in 2014. Previously, Kaspar worked at Toronto Dimonion Securities, Deutsche Asset and Wealth Management and Merrill Lynch. Kaspar is a Managing Director and Senior Portfolio manager. Kaspar is a CFA charterholder

Malin Rosengren joined BlueBay in 2016 as a graduate intern. Malin is a specialist in sovereign credit. She has a postgraduate diploma in economics from the University of Warwick and a BSc in Development Studies from Lund University.

Mark DowdingFund manager

Investment process

The BlueBay fixed income philosophy is grounded in a belief that markets are inefficient and can be exploited. The firm’s investment approach is consistent across their products. Every product is broken down with a benchmark, alpha target and the alpha sources expected to contribute to outperformance. This is one of their more core offerings.

Outperformance comes from four different sources. The most important of these is sovereign/corporate credit, but it also includes local currency rates, currency and term structure. These components are then broken down even further into granular alpha sources which are all independently analysed by members of the team.

An important initial part of the process is idea sharing and discussing the latest insights. The CIO and senior risk-takers have an investment forum meeting once a week. A macro group, consisting of senior investment professionals, meets daily to provide timely analysis on key macroeconomic and market developments.

A team of ten macro experts feeds ideas into the three portfolio managers. Team members each have their own specialist areas. Macro trends within the overall investment environment are discussed and debated. Fundamental country research identifies the value in each market. Every element of an investment (valuation, technicals, ESG, fundamentals) is assigned a score from +3 to -3. This then leads to an overall +3 to -3 score, with +3 being the most positive and the highest potential for alpha. The final portfolio is constructed by the portfolio managers and holds up to 80 issuers.

ESG

ESG – Integrated

ESG is a critical part of this fund and has become an even bigger part of the process in recent years. A number of sectors are automatically excluded from the investment universe. Controversial jurisdictions in violation of UN conventions will be excluded. ESG risks are included as a fundamental part of credit assessment. Every issuer is given a fundamental ESG score which is determined by the ESG investment team and the analyst.

In addition, every potential investment is given a separate ESG score which includes the materiality and relevance of the ESG risk factors to the investment. This is solely assessed by the analyst/portfolio manager.

Risk

This is a core product with a target of beating the benchmark, the Bloomberg Global Treasury Total Return Index, USD hedged, by 150 basis points after fees. Risk is carefully managed. The fund’s neutral position is to hedge currency to USD but it has active currency management of up to 30%.

The fund is subject to both interest rate and duration risk, it also has some exposure to emerging markets, which can be more volatile.

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Read more about this fund

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