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 bottom up stock analysis. This approach recognises the circularity (or inconsistencies) in data, the nature of correlations between asset classes and the variation in inefficiencies through the cycle.
The managers seek good investments rather than buying expensive debt in good companies. This means market analysis must always be coupled with an examination of value. The timing of any investment should be finessed to optimise returns. For example, the occurrence of forced selling in the market is often a harbinger, or technical indicator, of a time to initiate buying a bond. The managers refer to optimising returns as they always consider attendant risks in any investment.