In order to protect investors against interest rate hikes, fund managers have adopted a duration strategy, in which they reduce the sensitivity of their fund to bond movement by buying bonds with shorter maturities.
The GIS Global Low Duration Real Return Fund and the GIS Low Duration Global Investment Grade Credit Fund will be managed by two of the firm’s chief investment officers.
Mark Kiesel, deputy CIO and global head of corporate bond portfolio management team, manages the GIS Low Duration Global Investment Grade Credit Fund. The fund focuses on short-dated corporate bonds and aims to provide investors with less sensitivity to interest rate risk than a traditional global credit strategy.
“Investors are looking for solutions to lower their overall exposure to interest rates in a potentially rising rate environment. This new strategy can provide investors with the opportunity to participate in the short dated segment of the global credit market, providing more flexibility and less sensitivity to interest rate risk than a traditional global credit strategy,” Kiesel commented.
Deputy CIO and head of the real return portfolio management team, Mihir Worah, manages the GIS Global Low Duration Real Return Fund. This fund’s strategy is to make inflation-linked bond allocations to balance lower real interest rate risks.
Worah said: “We believe that investors should always be prepared for the risk of rising inflation. The array of policies implemented by developed country governments and central banks to address the global financial crisis has resulted in unsustainably high debt levels and zero-bound nominal interest rates. While these policies have successfully suppressed the risk of deflation and depression posed by the crisis, they have also increased the risk of higher inflation in the years ahead.”
