Video transcript
Will the fund use the same investment philosophy and process as your previous mandate?
We’ll look at the four risks: interest rate risk, credit risk, currency risk and liquidity risk. Nothing’s going to change there. We are doing top-down for our asset allocation, then bottom-up to fill up the buckets with names. I think the risk management side, we’re going to be really specific on the credit side, below-investment grade credit and really strict on having 1.5% or less in each one individual name so no one name can destroy our year. And on the currency side and the interest rate side, we’re going to be a little bit more active on those because we think with the volatility that’s been happening probably for the next six to nine months due to the fact that we have an election and some other events around the world, we can take advantage of that. So there may be some uh increased opportunities there.
Can you speak to the importance of flexibility in your approach?
What hasn’t changed is we have to have a view that we’re going to embrace credit risk, we’re going to embrace currency risk, we want to have duration risk, and we want to understand the liquidity of the portfolio. That hasn’t changed. Managing those risks has not changed. But you have to have a core view around that and understand when new news comes in, that may have to change, as such the Agile name, so we have the ability to maneuver. I think what’s important is to have a view, well we think rates are going to go up, okay, so we’re going to have a shorter duration profile. When that changes or the catalyst changes that, then we’ll extend that a little further. Credit works out, it’s overdone, we’re going to have to take that down and go somewhere else. But really the process for us is still the same and the risk is still the same.
Why actively manage currency?
I grew up in the foreign exchange business learning all the different products together with fixed income. So I had that bias to become a foreign exchange trader at one time. I also looked at the bond side, so I did both, so hedged and unhedged bonds as we saw fit. We do feel that there is an opportunity set to add value in foreign exchange. Our networks that we developed over the last 30-35 years, together with, I think our intuition and our experience, we think there’s opportunities to take advantage of currency volatility and add value at the edges.
Where does this product fit?
We said that this is the core product and then you could add the pieces as satellites around that core product. So if you wanted to have more high-yield, you buy a high-yield fund; you want to have bank debt, you buy a bank debt fund; you want to have more investment grade, you buy an investment grade fund. We can do the asset allocation for you. So for someone that’s trying to duplicate what we do it would be very difficult, especially when there’s currency hedging that happens 24/6 and at two to four in the morning when we’re actually adjusting currency hedges. So that flexibility for us I think we have where the individual really can’t, but we think it’s a core product that they would utilize.
Why now?
Well I think number one, we’re very fortunate that the opportunity has come about where rates have gone higher. So instead of being, you know, close to zero, you have an opportunity to clip a coupon. So that’s number one. Number two I think we’re going to have increased volatility around elections and events, and we pride ourselves on taking advantage of that volatility. Number three I think that long term with rates not going to zero, we have a chance to clip coupons and add value in currencies, duration and asset allocation. So I think that as we go forward for the next five-ish to 10 years, we have an opportunity to have returns that I think are commensurate with levels of rates between four and eight percent. So that, to me, gives us a great opportunity.
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