The Investec GSF global defensive bond fund aims for total returns, comprising income, growth and currency gains, by investing globally in a portfolio of interest-bearing securities and related derivatives. It can invest in all fixed-income markets and has the ability to create short positions in bonds and currencies synthetically through derivatives under the Ucits III rules.
The fund aims for lower volatility than the average global fixed income fund and is managed by Investec’s co-head of fixed income John Stopford. Stopford joined Investec through its merger with Guiness Flight in 1998, having worked for Guiness Flight since 1993. He had previously worked as a specialist global bond and currency portfolio manager for Mitsui Trust Asset Management.
In managing the new fund, Stopford will draw on Investec’s fixed income and currency team, using both bottom-up and top-down research to build long and short positions in the portfolio. He will be able to generate money from bonds and currencies that are seen as unattractive through synthetic shorting. This dual long and short approach gives Stopford more flexibility, which Investec expects to provide more opportunities to make money, diversify and control risk.
Investec says government bond and cash yields are low in developed markets, even when adjusted for inflation. It says traditional long-only bond funds tend to perform best when yields are falling, but because yields are already low, the firm feels they are more likely to rise than fall in the future.
The company also highlights the way that returns vary significantly across different areas within fixed income markets and points out that performance between fixed income sub-sectors changes over time. This makes a fund that holds assets to suit the economic environment, while avoiding or shorting areas that do not offer good value, an attractive proposition for investors.
However, its current lack of a sterling share class may be an obstacle for some potential investors in the UK.