Exploiting the Changing Bond Markets | Liontrust Sustainable Investment team | Liontrust Asset Management PLC

Exploiting the Changing Bond Markets

Liontrust Global Fixed Income

Howis the Liontrust Global Fixed Income team differentiated?

  • David Roberts, Phil Milburn and Donald Phillips have more than 60 years of combined investment experience and have all worked together before joining Liontrust at the start of 2018. David, Phil and Donald have long track records of managing bond funds.

  • Decision making within the team is streamlined because it consists of only three experienced managers. The team does not have an investment committee or analysts, resulting in a concentrated portfolio of the managers’ best ideas in bond markets.

  • The investment process is designed to be flexible to enable the fund managers to buy when bond markets are cheap and risk is underpriced and to sell when markets are expensive and risk is overpriced. The managers only commit cash to the market when they believe investors will receive a return that justifies the risk they are taking.

  • The fund managers seek to take advantage of market inefficiencies through understanding the economic environment, bottom up stock analysis and flexibility over duration, credit, sector and geographical allocations. They invest on the basis that value and fundamentals reassert themselves over time.

Presentations

Donald Phillips - What is your 10 year outlook for fixed income assets?

Recent insights from the team

10 trades for the New Year (revisited after six turbulent months)
David Roberts

Back in January, David Roberts identified 10 high-quality sovereign trades. Nearly six months later and with the world living with Covid-19, David assesses how successful these trades have been and what they now say about the outlook for bond markets. Read more

10 macro and micro fixed income trades for summer
Global Fixed Income team
Active management is largely about taking opportunities and the Global Fixed Income team highlight ten potential alpha sources in their funds for the summer months, across macro trades, investment grade and high yield. Read more
GFI Quarterly: Reasons to be cheerful (as well as fearful)
Phil Milburn

Covid-19 uncertainty has lowered confidence in economic forecasts. But Phil Milburn explains why there are reasons to be cheerful as well as fearful and where the team is finding investment opportunities in investment grade and high yield. Read more

The income case for quality high yield
Phil Milburn & Donald Phillips
With widespread cuts and suspensions to dividends by equities, Donald Phillips and Phil Milburn propose the quality end of high yield as a potential asset class for income investors. Read more
Talking at home with David Roberts
David Roberts

David Roberts on working from home, how he's adapting in the current climate and the opportunities for positive change after Covid-19. Read more

The Liontrust Global Fixed Income process

The fund managers believe fixed income markets are inefficient and there are myriad ways of adding value to investors’ portfolios. The inefficiencies are caused by many market protagonists who are not price sensitive, ranging from the macroeconomic distortions caused by central banks to the idiosyncratic scenarios when companies need to raise debt finance and price accordingly. The Liontrust Global Fixed Income investment process is designed to take advantage of these inefficiencies through a thorough understanding of the economic environment and detailed analysis of individual companies and bonds. The process uses the same framework to garner a thorough understanding of the economic environment and for company analysis: fundamentals, valuations and technicals (FVT). These three factors are examined regardless of what the managers are analysing, from a duration position to an investment in a speculative grade rated company.

 

In judging whether a company is an attractive long-term investment, the managers analyse the following factors, which they call PRISM:

 

Liontrust GFI PRISM  

Protections: operational and contractual, such as structure and covenants

 

Risks: credit, business and market

 

Interest cover: leverage and other key ratios

 

Sustainability: of cash flows and environmental, social and governance (ESG) factors

 

Motivations: of management and shareholders

 

Read more

Further information

Key risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in Funds managed by the Global Fixed Income team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Bond markets may be subject to reduced liquidity. The Funds may invest in emerging markets/soft currencies and in financial derivative instruments, both of which may have the effect of increasing volatility.
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