The IA Global Mixed Bond sector is relatively new, having been formed in April 2021 as a result of the split of IA Global Bonds into 14 new sectors. We welcomed that reclassification because the original Global Bonds sector contained funds investing in a variety of currencies, across companies and/or governments and across the credit quality spectrum and yield curve.
This made comparisons between strategies challenging. The new classification provides specific sectors for government bond, investment-grade corporate bond, and high-yield corporate bond funds across major currencies – euro and US dollar.
Albeit to a lower extent than its catch-all predecessor, the IA Global Mixed Bond sector is home to a variety of funds that aim to deliver a variety of outcomes. This is because the only requirement for inclusion is to have a minimum exposure of 80% to bond securities.
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As the IA definition states, funds in this sector “may invest in a broad mix of bonds across the bond credit, type and/or currency spectrum, which may involve a significant degree of flexibility. At any point in time, the asset allocation could theoretically place the fund in one of the other global bond sectors or the USD or EUR bond sectors”.
The sector therefore presents investors with funds that show different interest rate risk exposures, varying regional biases and a mix of different exposures across the credit spectrum. There are short-dated multi-sector credit funds, benchmark-agnostic total return-oriented strategies, core and even passive strategies oriented to the global aggregate benchmark, all within the sector.
In essence, investors could think of this fund grouping as an extension of the IA Sterling Strategic Bond sector, with the inclusion of global fixed income funds with different risk-return profiles, albeit without their currency exposure being 80% hedged back to sterling.
Read the full article in Portfolio Adviser’s June 2023 magazine
