Agility today for a better tomorrow

Challenging times need agile investments. Is your portfolio flexible enough to ride the waves throughout the economic cycle?

Challenging times need agile investments.

Our strategy aims to bring stability and potentially strong returns throughout the economic cycle, seeking both income and growth of your investment. We have the flexibility to choose a diverse mix of bond investments to balance different levels of risk with the ever-changing markets. All designed by an established global, active asset management company with over 25 years of fixed income expertise.

Discover our Global Strategic Bonds Strategy and scroll down to learn more about how unconstrained fixed income investment approach could benefit your portfolio.

Our Global Strategic Bonds Strategy

AXA IM’s global strategic bonds strategy is an active unconstrained fixed income strategy that aims to take advantage of market opportunities and focus on downside preservation to deliver potentially attractive risk-adjusted returns throughout the economic cycle.

As an unconstrained, flexible strategy it can allocate across the global fixed income universe (government bonds, inflation linked, investment grade credit, high yield and emerging market debt) and seeks to respond to different stages of the market cycle and allocate accordingly.

The investment process is based on our proprietary framework which breaks down the global fixed income universe in a simple and transparent way, according to risk factor sensitivity. It allocates across three risk buckets – defensive, intermediate and aggressive – allowing the Manager to adjust the allocation depending on the market environment, to help mitigate risk.

You can read the key highlights of the strategy below.

 

Uncovering Opportunities across the globe
 

1

Total return

Focus on attractive risk-adjusted returns throughout the economic cycle

2

Unconstrained

Non-benchmarked, flexible exposure across the fixed income spectrum
 

3

Global opportunity set

Representing the “core strategies” from our global investment process

 

4

Diversified

Structural diversification through risk buckets, ensuring low equity correlation
 

Key themes for Global Strategic Bonds strategy in 2021

 

 

 

Implications

  • Recovery is underway but is reliant on continued QE support1
  • All eyes on the Fed following more hawkish tone
  • Rates have rallied after Q1 sell off

Current strategies

  • Building up a duration position, concentrated in USD
  • Tactical rotation from steepening to flattening

 

 

 

Implications

  • A return to the roaring ’20s?
  • Higher inflation expectations
  • Credit spreads continue to tighten

Current strategies

  • Profiting on inflation break even trade
  • Buying credit and high yield in early 2021, now maintaining levels

 

 

 

 

Implications

  • Scale of central bank stimulus in 2020 fuelled broad-based market rally
  • Greater differentiation between “winners” and “losers” in 2021
  • Valuations now more stretched

Current strategies

  • European financials & corporate hybrids (BBB-rated)
  • US and Asian high yield single name selection
     

 

 

Implications

  • Vaccine rollout not straightforward; should be some bumps in the road
  • How far does the reflationary trade go?
  • COVID-19 will have a long-lasting impact on jobs and certain sectors

Current strategies

  • Maintaining a healthy cash pile
  • Active on our Credit Default Swaps hedge

 

Source: AXA IM as at 31/07/2021. (1) “QE” refers to quantitative easing. These are internal views which are subject to change without notice, and do not constitute as financial/investment advice or recommendations. 

 

How we incorporate ESG into our Global Strategic Bonds strategy?

ESG incorporated into the investment process to help achieve risk-adjusted returns

 

ESG data & research

Exclusions*

Leveraging internal ESG scores/research throughout the investment process

AXA IM Sectorial Policies

Controversial Weapons, Soft Commodities, Palm Oil, Climate Risks

AXA IM ESG Standards

      Tobacco, White Phosphorus, UNGC Violations, ESG Quality
 

Engagement

ESG score objective

Proactively engage and vote

Targeting a better overall ESG score than a proxy ESG benchmark

 

Source: AXA IM, as of 30/04/2021. * Based on the AXA IM exclusions policies. The ESG data used in the investment process is based on ESG methodologies which rely in part on third party data, and in some cases are internally developed. They are subjective and may change over time. Despite several initiatives, the lack of harmonized definitions can make ESG criteria heterogeneous. As such, the different investment strategies that use ESG criteria and ESG reporting are difficult to compare with each other. Strategies that incorporate ESG criteria and those that incorporate sustainable development criteria may use ESG data that appear similar, but which should be distinguished because their calculation method may be different.

In conclusion... Why Global Strategic Bonds strategy?

 

 

 

1

Our strategy is designed to behave as a bond strategy should do: aim to offer potential returns that are uncorrelated with equity markets

 

 

2

At the heart of our strategy is a proprietary investment framework that is simple and transparent: offering a coherent approach to unconstrained fixed income

 

 

3

We offer a truly global solution: leveraging the core strategies of AXA IM’s global fixed income process and backed by local expertise

So why investing in Unconstrained Fixed Income products?

Traditional fixed income investing is often benchmark-oriented. This means the aim is to add value over a chosen index, regardless of the index is moving up or down. These types of portfolios are usually built with reference to that index and can be constrained to a particular area of the fixed income universe such as a region, sector, maturity or credit quality.

An unconstrained – or ‘go anywhere’ - approach is benchmark-agnostic with portfolio construction generally based on growing income and capital without reference to an index. This provides the potential flexibility to capitalise on opportunities across the fixed income spectrum as and when they arise.

The focus is usually on aiming for risk-adjusted returns. In other words, trying to achieve a potential return for a given level of risk. It may therefore form a core bond portfolio for investors seeking moderate capital growth and income.

 

And why AXA IM for Unconstrained Fixed Income products?

AXA IM's fixed income investment team has  a proprietary framework which breaks down the global fixed income universe in a simple and transparent way, according to risk factor sensitivity. We categorize bonds into three risk buckets – defensive, intermediate and aggressive – so allocation can be adjusted depending on the market environment, to help mitigate risk

Potential Benefits of Unconstrained Fixed Income Investing

There are two components from a fixed income portfolio: yield – or income return from coupons – and capital growth of the assets over time. 

Holistic approach

Some bond investors focus only on the income element but in recent years historically low government bond yields are making it harder for traditional fixed income strategies to generate adequate income from lower-risk investments. Simply chasing higher yields may cause investors to ignore increasing risk in the portfolio.

Unconstrained Fixed Income investing is a more holistic approach that considers both income return and capital return, rather than an individual component. Income received by the portfolio can be reinvested back into the underlying assets with the aim of maximising total return.

Unconstrained total return

An unconstrained approach can lend itself well to generating potentially attractive total return. With the focus on flexibility and diversification, unconstrained fixed income investing aims to seek out opportunities for both income and growth across a broad range of fixed income securities while balancing the risks of different assets. 

Fixed income comprises a variety of sub-asset classes. Different bonds potentially have different performance and risk drivers. Performance of each sub-asset class is correlated to a different part of the economic cycle. The economic cycle is in constant motion so a portfolio needs to be able to adapt.

An active, unconstrained approach to fixed income investing can have the flexibility to use dynamic asset allocation and effective diversification to try and capture different performance drivers at the right time, while managing the associated risks.

 

How they work? 

Active unconstrained -approach typically aims to take advantage of market opportunities and focus on downside preservation to deliver potentially attractive risk-adjusted returns throughout the economic cycle.

This approach can allocate across the global fixed income universe (government bonds, inflation linked, investment grade credit, high yield and emerging market debt) and would seek to respond to different stages of the market cycle and allocate accordingly.

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
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performance is no guarantee of future returns and is not necessarily indicative of the future performance of the Fund,
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