Formerly head of high alpha fixed income at L&G, Hodges officially joined Nomura yesterday as head of unconstrained fixed income and told Portfolio Adviser the new fund Nomura is launching for him will thrive in an environment of increased volatility and uncertainty.
“We have much less certainty about the future level of growth and sustainability, much less certainty about whether interest rates are going to go higher or lower than we did. And, in such an environment a product that doesn’t suffer from some of the cyclicalities of a single strategy fund gives you a much greater potential opportunity to recognise value and capitalise on it.”
According to Nomura, the new Global Dynamic Bond Fund is expected to launch around the middle of January subject to regulatory approval; it has been submitted to the Dublin regulator.
According to Hodges, in principle his new role at Nomura will be identical to the one he vacated at LGIM, in that he will be running a global, unconstrained bond fund that aims it provide a total return and immunise investors as much as possible from volatility.
But, he said the new fund is going to be issued in a number of currencies, which makes it a truly global offering.
And, he added: the role also gives him a broad remit that won’t just stop wit the Global Dynamic Bond Fund.
“Hopefully it will allow us to add on extra products as new opportunities arise; it is an exciting opportunity,” he said.
Mark Roxburgh, head of marketing and client relations at NAM UK said: “We expect to have some other fixed income products in the future, a number will be under Dickie and Ben’s [Bugg] guidance but we may also add other specialist teams as and when we find them appropriately. If we look at the group overall at the moment, we have quite substantial assets in the fixed income space so it is a natural development for us to try and take that forward.”
The environment
Asked his view on the nature of the uncertainty around both economic growth and when interest rates are likely to rise in the UK and the US, Hodges said, he is of the belief that rates are unlikely to go up in 2015.
“I just don’t think we have a sufficiently sustainable level of growth for central banks to successfully raise interest rates without undermining the stability of economic growth,” he said. Adding that in an environment of benign inflation, he does not see why central banks would feel the need to raise interest rates just because the level of employment is improving in the context of a low wage inflation environment.
Currently, given the need for income and the generally benign environment, he still sees value within the high yield market, particularly after the moves in October, but he said he is also looking within emerging markets.
“The problem is that everyone is holding the same assets I would argue… and the challenge is that the much reduced liquidity environment is going to be with us for many years.
To that end, he added, “a product that is diversified and global and that uses all the tools in the toolkit has a greater probability of being successful and meeting investor expectations.”
