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Investment committee conversations
Government bonds were the topic of conversation in one of our investment committee meetings this...
Man GLG Strategic Bond
Manager, Craig Veysey, takes full advantage of the 'strategic' title of this fund, using his unconstrained mandate to provide an attractive monthly income and the potential for capital growth. He invests predominantly in corporate bonds, with tactical allocation to government bonds to protect the portfolio and enhance total returns.
Note: The Sanlam Strategic bond fund, also run by Craig Veysey, was merged into the Man GLG Strategic bond fund in September 2019.
Our opinion
The fund has a very simple and clear strategy. It combines a solid long-term core of corporate bonds, with a shorter term tactical allocation to government bonds, that can be traded very quickly to adapt the portfolio to different environments. This a simple common-sense approach. We like the fund’s simplicity and flexibility, and the manager’s long term risk-adjusted performance, which has been excellent. In addition, the fund has the support of Man GLG’s strong credit and risk teams.
Company description
GLG, a member of Man Group since 2010, is listed in the UK, USA, Switzerland and Hong Kong. With an on-the-ground presence in key markets, GLG delivers investment strategies across various asset classes, sectors and geographies. GLG funds were rebranded in August 2015 to Man GLG. The group was awarded the Elite Equities Provider Rating each year from 2016 to 2020.
Fund manager
Craig joined Man GLG in October 2018, taking his old Sanlam Strategic Bond fund with him. This was subsequently merged with the existing Man GLG Strategic Bond fund. Craig has 20 years of industry experience and previously worked at Scottish Widows Investment Partnership, HSBC Investment management and WestLB Mellon Asset Management. Craig was responsible for fixed income at Sanlam from 2009 to 2018 and was lead manager of the Sanlam Strategic Bond fund from its launch in 2012. He is a CFA charterholder, has a degree in Economics from Liverpool University, and a Master’s in Finance and Investment from Exeter University.
Craig VeyseyFund manager
Investment process
Although this fund offers investors a monthly income, its main focus is on total returns and avoidance of short-term losses.
The core of the fund is undervalued investment grade corporate bonds and those that are close to the investment grade/high yield bond crossover point. This makes up 45% to 85% of the portfolio and is typically towards the higher end of this range. These are long term positions with an emphasis on cheap bonds that are under appreciated.
When undertaking detailed fundamental credit analysis, the team will look at a company’s capital structure, covenants and building a financial model. The vast majority of the research is conducted in-house by the team, who also have access to the internal credit research from London and New York, as well as external research from CreditSights and top investment banks. The positions are unlikely to be traded much once they are initiated and, generally, they are held to maturity.
The final part of the portfolio is made up of government bonds and currency positions. This is by far the most actively traded part of the portfolio as Craig uses short term trades to quickly re-position the fund for different environments. The fund can also take some currency exposure, although this will be limited to a maximum of 20% and is mostly opportunistic. Government bonds typically form between 15% and 35% of the fund.
ESG
ESG - Integrated
Man Group has a firm-wide exclusions list as a minimum set of standards for investing, based on third-party data and overseen by an independent committee. Beyond these formal constraints, Craig has the belief that bonds with higher ESG scores are likely to outperform over the longer-term, all things being equal, as well as those improving their scores. As such, he integrates a two-fold analysis of ESG factors in his process. One is the screening of the universe, including the broader company policy, and the second through integration in the fundamental research analysis. The screening uses multiple data sets from different third parties to ensure there is broad coverage. Craig will look at these scores relative to peers, as well as how this score is changing. This also helps to identify any controversies a company may be involved in.
The fundamental research focus uses Man Group’s proprietary ESG Analytics tool. This will enable Craig to score and quantify a company’s relationship with, and impact on; employees, suppliers, regulators customers, the environment and other stakeholders to assess what impact identified ESG issues will likely have on a company, and how this is valued in the price of its debt stock.
Risk
The portfolio is unconstrained to any benchmark, but is generally well diversified across many different holdings, sectors and geographies. Craig typically dislikes emerging market debt and prefers developed market credit exposure, so the vast majority of the fund is generally invested in UK, Europe and the US. Man GLG has an independent risk team which also monitors liquidity risk, market risk and counterparty and credit risk. The team reports daily to Craig.
Read more about this fund
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