Sections

130/30 approach benefits fixed-income mandates - Barings

GLOBAL - A 130/30 approach can benefit not only equity but also fixed-income investors, according to international investment firm Barings.

The asset manager believes relaxing the long-only constraints on fixed-income portfolios can allow better access to alpha and improve risk and return characteristics.

It divides sources of global fixed-income portfolio excess return into five main dimensions - inter-market spread positioning, yield curve positioning, currency positioning, credit positioning and duration management. All bar the latter benefit from a shift to 130/30, the asset manager says, as the approach removes long-only constraints and broadens the opportunity set.

In duration management, Barings argues, there is in most cases already sufficient scope to outperform the market from management of duration against the benchmark.

"We are seeing more demand from institutional clients and consultants for alpha generation from fixed income portfolios. Multi-currency global fixed income 130/30 investing offers one way to both generate more alpha and improve the information ratio while still investing relative to a benchmark."

"Most of the debate around 130/30 strategies has, up to now, been focused on the equity side. However, the sources of excess returns and the potential benefits of 130/30 fixed income investing are quite different from the equivalent equity only mandates," says Barings' director of fixed income Toby Nangle, in a paper on the subject, entitled 130/30 fixed income investing: relaxing the long-only-constraint.

Barings was among the first wave of managers to be awarded a global fixed income 130/30 mandate by US pension fund CalPERS in June 2007.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2444

    Asset class: Trade Finance.
    Asset region: Global.
    Size: USD 10m.
    Closing date: 2018-06-25.

  • QN-2452

    Asset class: Hard Currency.
    Asset region: Emerging markets.
    Size: USD 300 mil..
    Closing date: 2018-06-22.

Begin Your Search Here