Active by design. Independent by principle.

Video transcript

Speaker

• Bryn Jones – Head of Fixed Income, Rathbones Asset Management

Transcript

Why fixed income is compelling today

Bryn: Fixed income provides a compelling investment solution for investors today. We've moved from a period of very low interest rates, when the TINA trade – there is no alternative to equities – dominated investment thinking. Today, there are strong alternatives available through fixed income, providing attractive levels of income for clients.

Long-term capital market assumptions for equities may be in the region of 8% to 9%, but with significant volatility. Fixed income can now potentially offer similar returns over the long term with considerably lower volatility. As part of a balanced portfolio, bonds are behaving more like bonds again, which is an important development for investors.

It is also worth highlighting the role of active management in fixed income. Active credit fund managers have tended to outperform passive managers over long periods and across market cycles. As a result, active credit remains a particularly attractive area for investment.

Rathbones' fixed income expertise

Rathbones Asset Management has extensive expertise in fixed income. I've been with the firm since 2004, managing the same ethical bond fund strategy throughout that period.

Our team has experience across multiple market cycles, including the financial crisis in 2008, the volatility of 2011, the COVID-19 disruption in 2020 and the sharp rise in interest rates during 2022. The value of that experience should not be underestimated.

We have also benefited from a highly stable team over the last decade. Alongside colleagues such as Stuart and Lisa, we have developed strong credit research capabilities. Combined with a consistent philosophy, process and team structure, this has enabled us to deliver strong active fixed income fund management over the long term.

The value of active management

Almost all of our investment decisions are active decisions. We focus on active fixed income because we believe passive approaches can be limited.

Passive strategies are often constrained to holding the largest and most indebted issuers within a sector. This has become increasingly apparent in recent years with significant issuance from hyperscale companies. Active management allows us to be far more selective and to focus on risk-adjusted opportunities.

A key part of our process is our Four Cs Plus framework, which supports portfolio construction and risk management. We assess measures such as Sharpe ratios and break-even duration for individual assets, and these insights help inform our fundamental research.

Alongside this, we use sophisticated valuation techniques to identify assets that appear attractively valued relative to comparable opportunities. We have also developed proprietary analytical tools within the team that complement our fundamental research process and help drive long-term outperformance.

A consistent investment philosophy

Our shared investment philosophy underpins the returns delivered across our fund range.

We believe in empowering investment managers to make active decisions within the framework and objectives of their respective funds. While each strategy operates within its agreed mandate, managers retain the flexibility to act on their convictions.

At the same time, our research process remains consistent across the business. We apply the same fundamental analysis and valuation disciplines throughout our fund range, helping to identify opportunities and support long-term investment performance.