In light of lower expected returns from bond markets and more volatility, should advisers be looking at different strategies to gain exposure to fixed income?
The new offering from Janus Henderson, the Absolute Return Income fund, is the first onshore open-ended investment company to be launched from the Janus stable following its merger with Henderson.
This predominantly investment grade fund is looking to provide consistent returns whether the bond markets are in risk-on or risk-off mode, or whether rates are rising or falling.
Despite the word ‘income’ in the name, the yield on offer is only 2 per cent.
The management team of four, led by co-head of global bonds Nick Maroutsos, has been running a similar strategy for more than a decade and is looking to combine capital preservation with a steady income stream.
The fund can go anywhere globally in fixed interest; the level of risk-adjusted returns on offer is key. Derivatives will be used to reduce risk or enhance returns.
The fund is effectively split into two parts; a core list of bonds to provide the ‘yield foundation’ and then some more tactical plays to overlay.
The former part of the portfolio will mainly be investment grade bonds, whereas the latter will be derivative-based and could be a play on interest rates, for example, or liquidity, volatility or many other areas.
As is the case with many bond funds, this one looksto combine a thorough understanding of the macroeconomic environment, with regard primarily to monetary and fiscal policy, then combine that with country views and bottom-up stock selection.
A key tenet of this fund is to provide less interest rate sensitivity than a traditional core bond fund – do not forget it is typically rate movements that drive bond prices down or up.
My biggest complaint about this fund is putting it in the absolute return sector, as I dislike it. If Janus Henderson thinks this fund can deliver on the long-term mandate, stick it in the Investment Association’s global bond sector.
The ongoing charged figure is a competitive 0.55 per cent. Overall, it looks like an interesting new fund offering – something different from the traditional bond funds available.
Ben Yearsley is director of Shore Financial Planning