Look beyond market volatility for income opportunities in Asia

Want to capture Asia’s growth, while smoothing portfolio volatility?

Fixed income investors today are faced with different risks, whether it’s higher volatility, inflation or rates expectations. AXA Investment Managers are here to help you look beyond the volatile markets while seeking potential income for your portfolio. Our Asian Short Duration Bonds strategy aims to capture attractive income from Asia’s robust growth potential, while targeting to keep a 3 years or less average duration to hedge against interest rate movements and help smooth portfolio volatility.

Read on to find out more about this strategy and the portfolio management team.

1. Why a Short Duration strategy?

  • Duration could be a  useful tool in helping to manage portfolio risk.
  • Our Asian Short Duration Bonds strategy targets an average duration of 3 years or less. Investing in a short duration strategy could potentially help you:

 

2. Why Asian Fixed Income now

  • Asia has Strong Structural Fundamentals
  • Comparatively a Better Yield & Credit Profile, vs other Emerging Markets and US

 

 

3. Three key potential attractions of Asian Short Duration Bonds strategy

Potentially attractive yield with low volatility in a world of near-zero interest rates

The strategy is well-positioned to aim at delivering stable income by capturing the yield premium observed in Asian credits, resulting in potentially high cumulative total return. Annualized dividend yields may be in the range of 4-5%

Sound risk management offering buffer against large drawdowns

It aims to maintain an average duration of 3 years or less. The short duration focus of the strategy may provide significant downside mitigation with lower volatility of shorter maturity bonds.

Short duration strategy hedges portfolio risks against higher interest rates

With global interest rates already at record lows, the chance of flat or rising rates is much higher than that of continuous falling rates. The short duration strategy may provide a natural hedge against future rate moves.

4. Three portfolio construction phases of our Asian Short Duration Bonds Strategy

Phase 1:

Constrain duration

Phase 2:

Build back yield

Phase 3:

Stable income generation

  • Duration target of 3 years or less
  • Potentially less sensitivity to interest rate movements
  • Clearer visibility of cash-flows
  • It does not give up yield despite
    duration restriction
  • Focus on capturing carry from
    fundamentally strong credits
  • Yield captured without taking
    additional risk

  • Potentially lower volatility compared to the overall market

By constraining a portfolio’s average duration
we can reallocate risk budget from active
duration to active credit

We replace term premium
with credit risk premium

We replace term premium with
credit riskpremium

 

Aiming to capture yield with interest rate mitigation and lower volatility

 

Past performance is not a guide to future performance. JPM Asian Credit Index is not the fund’s benchmark and is provided for illustration performance purposes only. No assurances can be made that profits will be achieved or that substantial losses will not be incurred. Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in the fund may receive as a distribution yield.

5. What are the key strengths in AXA IM's Asian Fixed Income team?

The Asian Short Duration Bonds strategy is managed by a team of AXA IM Fixed Income experts with years of solid experience in Asia, and in the short duration bonds space.

 

KEY AXA IM CAPABILITY

Managing short duration strategies for nearly 20 years, now around
USD20bn in eleven funds from Investment Grade to High Yield with a
broad geographical scope*

ASIA IS A KEY FIXED INCOME REGION

High growth economies coupled with rapidly expanding
and diversifying debt issuance has the potential
to provide an attractive short duration opportunity*

FAVOURABLE CREDIT
RISK PROFILE

The Asian hard currency credit market is more highly rated
than its global counterparts and rating trends are positively skewed*

HIGHER YIELD

Asian credits have historically offered a meaningful
spread premium over their global peers,
which allows potential yield enhancement for similar credit risk*

COMPELLING RISK-RETURN STRATEGY

Amend to “Shorter duration may reduce price and spread volatility,

while high relative credit spreads may limit

yield differential with the full duration universe”

 

* Source: AXA Investment Managers, as of Sep 2021.

Strategy/Fund Risks

The Risks include Risk of Capital Loss, Market & Credit Risks, Liquidity Risk, Derivatives and Leverage Risk, and Sub-Investment Grade debt securities (High Yield) Risk. Please refer to the relevant Prospectus and Product Highlight Sheet for more information on Risks.

Disclaimers:

The share classes of the Fund offered in Singapore under the Recognised Schemes are A Capitalisation USD, A Distribution
USD (m), A Distribution SGD hedged (95%) (m). This website and the information contained herein have been prepared and
issued by AXA Investment Managers Asia (Singapore) Ltd. (“AXA IM Asia”) (Registration No. 199001714W) for general circulation
and informational purposes only and does not constitute an offer or solicitation to purchase or sell shares of the Fund(s). AXA
IM Asia has been appointed as the Fund(s)’ Singapore representative and agent for service of process. To the maximum extent
permitted by law, AXA IM Asia makes no warranty as to the accuracy or suitability of any information contained herein and
accepts no responsibility whatsoever for errors or misstatements, whether negligent or otherwise. Such information may be
subject to change without notice. The Fund’s offering document or prospectus can be obtained from AXA IM Asia or its approved
distributors. An investment in the Fund entails certain risks and therefore should be undertaken only by investors capable of
evaluating and bearing the risks. You should be aware that investments may increase or decrease in value and that past
performance is no guarantee of future returns and is not necessarily indicative of the future performance of the Fund,
you may not get back the amount originally invested.
The Fund’s offering document or prospectus contains important
information on selling restrictions and risk factors, you should read them carefully before entering into any transaction.
The Fund may use or engage in financial derivative instruments and you should be aware of the risks associated with such
use in financial derivative instruments which are described in the Fund’s offering document or prospectus. The Fund may
have particularly volatile performance due to its investment policy or portfolio management techniques.This website has
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