Look beyond market volatility for income opportunities in Asia

Want to capture Asia’s growth, while smoothing portfolio volatility?

Fixed income investors today are faced with different risks, whether it’s higher volatility, inflation or rates expectations. AXA Investment Managers are here to help you look beyond the volatile markets while seeking potential income for your portfolio. Our Asian Short Duration Bonds strategy aims to capture attractive income from Asia’s robust growth potential, while targeting to keep a 3 years or less average duration to hedge against interest rate movements and help smooth portfolio volatility.

Read on to find out more about this strategy and the portfolio management team.

1. Why a Short Duration strategy?

  • Duration could be a  useful tool in helping to manage portfolio risk.
  • Our Asian Short Duration Bonds strategy targets an average duration of 3 years or less. Investing in a short duration strategy could potentially help you:

 

2. Why Asian Fixed Income now?

  • Asia has Strong Structural Fundamentals
  • Comparatively a Better Yield & Credit Profile, vs other Emerging Markets and US

 

 

3. Three key potential attractions of Asian Short Duration Bonds strategy

Potentially attractive yield with low volatility in a world of near-zero interest rates

The strategy is well-positioned to aim at delivering stable income by capturing the yield premium observed in Asian credits, resulting in potentially high cumulative total return. Annualized dividend yields may be in the range of 4-5%

Sound risk management offering buffer against large drawdowns

It aims to maintain an average duration of 3 years or less. The short duration focus of the strategy may provide significant downside mitigation with lower volatility of shorter maturity bonds.

Short duration strategy hedges portfolio risks against higher interest rates

With global interest rates already at record lows, the chance of flat or rising rates is much higher than that of continuous falling rates. The short duration strategy may provide a natural hedge against future rate moves.

4. Three portfolio construction phases of our Asian Short Duration Bonds Strategy

Phase 1:

Constrain duration

Phase 2:

Build back yield

Phase 3:

Stable income generation

  • Duration target of 3 years or less
  • Potentially less sensitivity to interest rate movements
  • Clearer visibility of cash-flows
  • It does not give up yield despite
    duration restriction
  • Focus on capturing carry from
    fundamentally strong credits
  • Yield captured without taking
    additional risk

  • Potentially lower volatility
    compared to the overall market

By constraining a portfolio’s average duration
we can reallocate risk budget from active
duration to active credit

We replace term premium
with credit risk premium

With volatile term premium
replaced by higher yielding credits
an effective and efficient trade-off is accomplished

 

Aiming to capture yield with interest rate mitigation and lower volatility

 

Past performance is not a guide to future performance. No assurances can be made that profits will be achieved or that substantial losses will not be incurred. Please note that the yield calculations are based on the portfolio of assets and may NOT be representative of what clients invested in the fund may receive as a distribution yield.

Interested to know more about Asian Short Duration?

5. Five reasons to consider this strategy

 

KEY AXA IM CAPABILITY

 

 

Managing short duration strategies for nearly 20 years, now around
USD20bn in eleven funds from Investment Grade to High Yield with a
broad geographical scope*

ASIA IS A KEY FIXED INCOME REGION

High growth economies coupled with rapidly expanding
and diversifying debt issuance has the potential
to provide an attractive short duration opportunity*

FAVOURABLE CREDIT
RISK PROFILE

The Asian hard currency credit market is more highly rated
than its global counterparts and rating trends are positively skewed*

 

HIGHER YIELD

Asian credits have historically offered a
meaningful spread premium over their global peers,
which allows potential yield enhancement for similar credit risk*

COMPELLING RISK-RETURN STRATEGY

Shorter duration may reduce price and spread volatility,
while high relative credit spreads may limit
yield differential with the full duration universe

 

* Source: AXA Investment Managers, as of Sep 2021.

Our key Fixed Income offering