IMPORTANT INFORMATION
Asset class
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Process
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Differentiators
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Team
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Track record
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Nicolas Trindade, lead manager of the AXA Global Short Duration Bond Fund, says investors need to go back to the Global Financial Crisis in 2008 to see the high levels of yield that are currently available within the asset class.
In this Fund in Five, we talk to Trindade, to look at the portfolio from five angles and understand the benefits the strategy offers in a falling interest rate environment.
Presenting the AXA Global Short Duration Bond Fund
Trindade says short duration bonds have the potential to mitigate the impact of market volatility as they have historically displayed a lower level of volatility and drawdown compared with the wider maturity market.
“The yield on short duration bonds remains very attractive, the highest they have been since the Global Financial Crisis,” he says. “At the same time yield curves are flat, meaning there is not much incentive to go longer duration because you don’t get any additional yield.”
Making the case for the asset class in a falling interest rate environment, he adds the regular cash flows from coupon income and maturing bonds provides a natural stream of liquidity if required.
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He says: “A short duration bond portfolio could act as an intermediate step into riskier assets, with short duration bonds potentially offering a cash-plus return for a limited increase in risk.”
Ratings as at 31 March 2024. Past performance is not a guide to future. For more information, visit artemisfunds.com/endorsements.
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Trindade says the investment philosophy adopted by all AXA IM’s fixed income funds is based on the belief that compounding income through active management is critical to generating long-term returns within fixed income.
“By directly investing in short-dated bonds, we can create a strategy with an attractive natural liquidity profile, minimising performance leakage from transaction costs and potentially benefitting in times of a rising yield environment,” he says.
“The process is based on a blend of top down and bottom up, both are very important,” he says. “You need to have the right macro views to be able to make the right sector or regional calls, but on the other side you also need to have the correct views on individual names, because otherwise your top down views won’t pan out the way you expect.”
Described as a high conviction, flexible portfolio, Trindade says the fund utilises the best ideas across AXA IM’s whole short-duration desk, with the portfolio currently invested in some 150 issuers.
The AXA Global Short Duration Bond Fund invests across the entire short-dated fixed income spectrum (those bonds with a maturity of less than five years), including sovereign bonds, investment grade, high yield and hard currency emerging market bonds.
“As we know we are the only fund among our peers that has such a broad investible universe at the front-end of the market,” says Trindade.
He adds: “The reason we have the credibility to do so is because we have been managing short-duration strategies at AXA IM for the last 25 years, across all the local markets in which we can invest.”
* Source: AXA investment Managers as at 18 October 2024. Shares invested in another currency than the above are exposed to exchange rate risk. Returns may be subject to fluctuations that can impact their performance.
17 MAY ‘17
Launch date
$315.65
AUM*
A-
Avg. credit quality
M
Described as an active bond fund, Trindade says the main sources of alpha for the portfolio come from asset allocation, sector allocation, and duration - which ranges from one-to-three years.
ESG factors are also fully embedded into the Fund’s investment process.
Trindade has been lead manager of the Fund since launch. He is supported by deputy manager Nick Hayes and collectively the two managers have over 40 years of industry experience.
“Given the fund invests across the fixed income spectrum, and I can’t be an expert in everything, it is important for me to rely on a team of local specialists, each of whom manage their own local short duration portfolios,” Trindade says.
“My job as lead manager on this global strategy is to take the best ideas from all the local portfolios and put them into this portfolio,” he adds.
In addition to drawing upon a team of six local specialists, the Fund also has access to AXA IMs wider income resources, including its fundamental credit research, macro research and responsible investment teams.
AXA IM has been managing short duration strategies for more than two decades.
According to FE Fundinfo, since launch to 18 October 2024, the AXA Global Short Duration Bond Fund has returned 16.5%*. Over the same time period, the average fund in the IA Sterling Strategic Bond sector is up 16.17%*.
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The AXA Global Short Duration Bond Fund has not only outperformed the sector average but has done so with much lower volatility and drawdowns.
“In 2021 we made the decision to de-risk the portfolio quite aggressively, which put us in a good position going into 2022, when yields rose hugely and credit spreads widened,” he says. “We subsequently took the opportunity to aggressively re-risk the portfolio, which aided performance.”
“One of the main contributors to performance since inception has been our asset allocation,” says Trindade.
Past performance is not a reliable indicator of future results.
Source: FE Fundinfo. Date: 23/04/18 to 18/10/24, Share class: Z accumulation, Currency: Pound Sterling, Basis: Bid-Bid
This is for investment professionals only and should not be relied upon by private investors. The value of investments and the income from them can go down as well as up so you may get back less than you invest. The value of investments in overseas markets may be affected by changes in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. Rising interest rates may cause the value of your investment to fall. The price of bonds with a longer lifetime until maturity is generally more sensitive to interest rate movements than those with a shorter lifetime to maturity. The risk of default is based on the issuers ability to make interest payments and to repay the loan at maturity. Default risk may therefore vary between government issuers as well as between different corporate issuers. Sub-investment grade bonds are considered riskier bonds. They have an increased risk of default which could affect both income and the capital value of the fund investing in them. They can also use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Issued by FIL Pensions Management and Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority authorised. Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM1023/382376/SSO/1223
FOR PROFESSIONAL INVESTORS ONLY
