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Euro Bond Absolute Return

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Institutional Strategy > Fixed Income > Euro Bond Absolute Return

Euro Bond Absolute Return

Active portfolio investing mainly in Euro fixed income through both long and short positions.

  • Active portfolio of euro-denominated bonds that seeks to outperform its benchmark¹ by 3% to 4% over a market cycle2 (typically 3 to 5 years)
  • Flexible portfolio that invests in the team’s best ideas without being benchmark-driven
  • Dynamic interest rate positioning with a duration range of -3 to +6 years
  • Focus on liquidity of the underlying securities
  • Aims to mitigate risk through multiple alpha sources with no structural credit bias
  • Managed by a team of experts with an average of 18 years’ experience, leveraging the resources of Neuberger Berman Fixed Income platform with over 170 investment professionals

Key Risks

Market Risk: The risk of a change in the value of a position as a result of underlying market factors, including among other things, the overall performance of companies and the market perception of the global economy.
Liquidity Risk: The risk that the strategy may be unable to sell an investment readily at its fair market value. In extreme market conditions, this can affect the portfolio’s ability to meet redemption requests upon demand.
Derivatives Risk: The strategy is permitted to use certain types of financial derivative instruments (including certain complex instruments). This may increase the strategy’s leverage significantly, which may cause large variations in the value of your share.
Credit Risk: The risk that bond issuers may fail to meet their interest repayments, or repay debt, resulting in temporary or permanent losses to the portfolio.
Interest Rate Risk: The risk of interest rate movements affecting the value of fixed-rate bonds.
Emerging Markets Risk: Emerging markets are likely to bear higher risk due to a possible lack of adequate financial, legal, social, political and economic structures, protection and stability as well as uncertain tax positions, which may lead to lower liquidity.
Counterparty Risk: The risk that a counterparty will not fulfil its payment obligation for a trade, contract or other transaction, on the due date.
Operational Risk: The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems including those relating to the safekeeping of assets or from external events.
Currency Risk: Investors who subscribe in a currency other than the base currency of the strategy are exposed to currency risk. Fluctuations in exchange rates may affect the return on investment.

Overview

Investment Philosophy

Three ideas guide us as we build our portfolios:

  • Fundamental analysis of the macroeconomic environment to identify long-term trends
  • Relative value approach that aims to identify investment opportunities
  • Efficient risk approach relevant to the Eurozone’s specific characteristics

Investment Process

We believe in an approach that combines top-down and bottom-up analysis to build actively managed portfolios with a focus on fundamental research and an efficient risk framework.

     

TACTICAL APPROACH

FORECASTS

  • Macro-economic analysis
  • 3M interest rate and credit forecasts

STRATEGIC ALLOCATION

  • Interest rate and credit risk budget
  • Integrating extreme market scenarios
  • Portfolio P/E < broader market

SELECTION OF ISSUERS

  • Debate/discussion with the analysts and choice of issuers
  • Euro buy/sell issuer list
  • Euro Model portfolios

BUILDING OF CLIENT PORTFOLIO

  • Selecting securities
  • Incorporating investment guidelines
  • Tactical management

Management

Yanick Loirat, PhD
Senior Portfolio Manager
20 Years of industry experience
1 Year with Neuberger Berman