Value Opportunistic Investment-Grade
The Value Opportunistic Investment-Grade strategy seeks to maximize total return over a three-year investment horizon.
The strategy uses a value-driven approach and seeks to generate return by investing in a portfolio of investment grade, fixed income securities. It seeks to add value by capitalizing on imbalances in the relationships among sectors and individual bonds. We believe that investing in undervalued sectors and bonds and selling expensive ones using a relative value assessment is the ideal process to capture value.
The strategy typically invests in US dollar-denominated fixed income securities including governments, corporate bonds, securitized bonds, sovereign and supranational entities, as well as municipal bonds. The interest rate risk for the strategy is derived using a methodology based on a three-year time horizon, where the main objective is to offset any principal loss over that period. There is no exposure to currency risk, high yield bonds or emerging market debt.
The US Multi-Sector Fixed Income team is made up of several New York based portfolio managers dedicated to value-oriented fixed income investing, and are supported by an experienced team of more than 30 global credit analysts, with geographical and industry expertise.
Our investment philosophy for the strategy is based on the premise that pricing inefficiencies exist in the market and our ability to identify those offers the potential to pursue superior investment performance. The portfolio managers focus on identifying investment grade bonds or sectors whose valuations have become dislocated from the underlying fundamentals, primarily due to technical reasons. We believe that purchasing undervalued bonds and selling them once they are fully-priced rewards investors. Portfolio allocation is independent of the benchmark and customizable to a client’s risk appetite. Our sector and security weightings are made independent from the benchmark and our positioning reflects our value approach, as well as the attractiveness of the opportunities relative to the broad market.
The US Multi-Sector investment team is responsible for the implementation of the Schroder Value philosophy. Portfolio managers collaborate with the sector specialist teams as well as the credit analysts, both of whom follow a disciplined, rigorous framework that combines fundamental research with relative value assessment. Our fixed income process consists of four distinct steps:
- Investment themes: Conduct in-depth proprietary market research (fundamental, quantitative and technical) to develop investment themes that will dominate markets over the long term
- Portfolio strategy: Based on investment themes, develop and prioritize investment strategies which will determine optimal portfolio positioning across sectors. This is done in close collaboration with the sector specialist teams.
- Portfolio construction: Implement strategies using a relative value framework with a focus on overall risk level and execute sector and security decisions using the input of the credit analysts and the traders
- Risk management: Ensure that mandates are managed in a manner consistent with their performance objective and corresponding risk profiles. Our three pillar approach provides a framework to continually review and monitor portfolios
The below graphic is an illustration of our investment process:
- Value-driven process – select securities with the best investment value
- Portfolio composition is based on assessment of relative value, not benchmark construction
- Robust scenario analysis to see how portfolio performs versus various interest rate scenarios
- Daily interaction among key decision makers to assess opportunities and relative value
- Sector allocation and individual security selection is the key to generating return