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The wheels keep on turning
Has there ever been a more difficult time to be an investment allocator or sub-advisor? Last year, election woes, a central bank bonanza from Tokyo to Washington and the feverish race for a Covid-19 vaccine left their mark on the world – and these were just the tip of the iceberg. The start into the new decade has been eventful, to say the least. But what are the themes that will shape the macro environment soon? What do the current conditions mean for asset allocation and manager selection? And what is the best way to assess money managers’ performance? Citywire put these questions to a five-strong panel of experts at a virtual sub-advisory roundtable. Manulife’s former multi-manager maven Bob Boyda moderated the event. Read more about the participants’ expectations for the months ahead and how they deal with the ‘rates lower for longer’ environment on page six. To find out about the challenges and opportunities asset allocators are facing now, turn to chapter two, in which Bob and his guests also debated the pros and cons of generalist versus specialist managers. The delegates finished by looking at the impact of Covid-19 on the manager selection process and discussed what it is they are searching for in prospective managers (page 18). Separating the wheat from the chaff is never easy, but in times like these, it is vital.
The big picture
Are we facing a golden age for credit?
The search is on
Specialists versus generalists in a crisis
Looking for the one
Finding the manager with the right edge
‘We’ve been trying not to overreact to the Covid environment’
Investment experts give their take on rate policy
Delegates
Andres Sanchez-Balcazar
Rob Balkema
BOB BOYDA
Andres Sanchez-Balcazar joined Pictet Asset Management’s fixed income team in 2011 and is head of global bonds. Before joining Pictet, he was a senior portfolio manager for Western Asset Management Company for six years. During his tenure, he was responsible for global, European, and absolute return fixed income portfolios. Previously, he worked for five years as a global and European portfolio manager with Merrill Lynch Investment Managers.
Rob Balkema has primary responsibility for managing Russell Investments’ US retail and institutional multi-asset solutions, including the firm’s traditional target risk balanced funds, outcome oriented portfolios, target date, and investment outsourcing mandates. In this role, he leads the team which integrates the firm’s equity, fixed income, real asset, and alternatives capabilities globally. He is tasked with creating strategic asset allocations for the portfolios, selecting managers or passive alternatives to populate asset classes, integrating the firm’s capital market insights, and positioning the total portfolio to help clients achieve their objectives. Balkema has deep experience researching and managing both traditional and non-traditional assets from his 14 years in the industry, all of which are with Russell Investments.
Bob Boyda has been in the asset management industry for more than 40 years. He is the retired head of global asset allocation for Manulife and John Hancock, where he managed more than $100bn in multi-asset portfolios in the US, Canada, and Asia. Boyda was a pioneer in the sub-advisory world, developing the methodology and practices for hiring sub-advisors for the mutual fund and insurance products environments. During his tenure, Manulife/John Hancock’s sub-advisory assets grew to more than $200bn, covering more than 40 sub-advisors and 100 assignments. Boyda currently heads his own investment company focusing on new residential construction and passive income. He has been on the board of the South Boston Neighborhood House, one of Boston’s oldest and largest community-based charities, for more than 20 years and served as treasurer for the past seven years.
Todd KERIN
Todd Kerin is a vice-president within PGIM Investments’ Strategic Investment Research Group (SIRG). He is a member of the SIRG’s portfolio construction team where he focuses on the discretionary management of multi-manager and asset allocation investment solutions, within traditional and alternative asset classes. Kerin joined PGIM and SIRG in 2006 as an investment manager research analyst. Prior to joining PGIM, he spent 12 years with Standard & Poor’s, working in various capacities. Most recently, he worked as a senior fixed income mutual fund analyst in S&P’s Credit Market Services Group. Kerin received his MBA in finance from St. Thomas Aquinas College and a BA in English literature from Western New England University.
Nilay Shah serves as a senior analyst on SEI Investments’ manager research team. In this role, he is responsible for manager due diligence and selection for SEI’s fixed income fund management and separate account business with a primary focus on US investment-grade strategies. Nilay earned a Bachelor of Science in Business Administration with concentrations in Finance and Economics from Drexel University and a Master of Business Administration with a concentration in finance from Saint Joseph’s University.
Gina Toth is a senior investment officer and portfolio manager within the multi-manager solutions team at UBS AM, focusing on long-only and liquid alternatives strategies. She leads the team responsible for manager due diligence and selection, portfolio construction, risk management and performance of traditional multi-asset strategies. Toth joined the firm in 2013. Previously, she worked at AllianceBernstein as a senior portfolio manager in New York and Sydney, specializing in multi-asset portfolios, asset allocation and custom solutions for the institutional, high-net-worth and retail channels, encompassing both traditional and non-traditional asset classes. She also spent 14 years in New York and London as a fixed income portfolio manager for US and global portfolios.
Nilay SHAH
GINA TOTH
The panel gives their take on rate policy and how a potential Japanification could affect the US.
What a year it has been. The brutal volatility rollercoaster in 2020, with market sentiment flip-flopping back and forth as investors meandered through political and pandemic crosscurrents, was certainly not for the faint-hearted. In March, Wall Street’s fear gauge closed at its highest level ever, surpassing even the financial crisis peak of 2008. The CBOE Volatility index, which tracks the 30-day implied volatility of the S&P 500, more than doubled to a record high of 82.69, setting the scene for the months ahead.
Crumbling economies, the increasing influence of China, a seemingly never-ending Euro crisis – allocators have enough on their plates as it is. From a fixed income perspective, however, it is historically low interest rates that are causing a stir now. The roundtable panellists took a deep dive into the ins and outs of rate policy and discussed the impact of a possible Japanification.
Subdued expectations
‘What people tend to think about rates these days is in the sense of, they’ve already been down enough, so they need to go up. They forget that we’ve been in that situation before, over the last 20 years I would say at least, where the market consistently overestimates how much central banks can actually tighten,’ he said. From his perspective, there are several structural forces at play that prevent interest rates from climbing back. ‘Everybody knows about the demographics playing against having higher rates, but we think it’s also very important to talk about that interplay between the accumulation of debt and the necessity, then, to keep rates low, to allow for the refinancing of that debt on one side.
Once economies accumulate too much debt, Sanchez-Balcazar said, they are required to spend a considerable amount of time and resources on debt repayments instead of making meaningful investments in other areas. That, in turn, leads to a ‘self-fulfilling mechanism’ where generating excess growth becomes increasingly hard. For Sanchez-Balcazar, the pandemic has intensified the issue of excessive indebtedness even further. ‘With the Covid crisis, we’ve just seen an acceleration of that by accumulating even bigger amounts of debt that are going to have to be refinanced in the future. We see this as a deflationary crisis and as a crisis that is going to make central banks cap long end rates to allow the refinancing of that government debt. It’s going to take a long time for us to get out of this particular deflationary phase,’ he said.
With the Covid crisis, we’ve just seen an acceleration of that by accumulating even bigger amounts of debt that are going to have to be refinanced in the future. We see this as a deflationary crisis and as a crisis that is going to make central banks cap long end rates to allow the refinancing of that government debt. It’s going to take a long time for us to get out of this particular deflationary phase,’ he said. Since the capacity of entire sectors of the economy, such as leisure, hospitality and travel, is well in excess of the prospective demand, it will be ‘very hard for the government to just support that forever,’ he said. ‘It’s going to continue to drag the economy down for long periods of time.’
Gina Toth, executive director, senior investment officer and portfolio manager at UBS Global Asset Management, begs to differ. Even though she is also in the ‘rates lower for longer’ camp, she argues that certain factors, including a possible tendency toward intra-national trade, could favor inflation over the medium to long term. The pandemic, she said, has caused countries to reconsider their supply chains. Economies around the world realized that they ‘can control supply chains better when they’re within their own borders than when they’re dealing with large global supply chains.’ In combination with the need to replace jobs, Toth believes manufacturing may become more domestically oriented. ‘As that happens, it could potentially have inflationary implications particularly given compensation differentials across the globe,’ she added. ‘I can see the pressures going the other way over the longer term.’ She agreed that the frontend of the US curve will likely remain pinned down for some time but expects that, ultimately, the steepening pressure in the backend is going to increase. ‘This is going to be a theme for some time. From an asset class perspective, we do think that Tips (Treasury inflation-protected securities) probably offer some potential opportunity.’ For Nilay Shah, who is part of the manager research group at SEI, slow growth and low inflation seem to be already priced into fixed income markets. But even though central banks remain supportive and provide a floor to valuations, it is hard to say if they will be able to suppress volatility. Overall, Shah said, there could be tail risk on the inflation or deflation front, depending on the magnitude of the government response. ‘Credit risk doesn’t just disappear with asset purchases. Overall, I don’t think the Federal Reserve will push rates negative, just given the potential impact on the money market industry in the US vs Europe, where it is significantly smaller. Theoretically, negative rates are deflationary longer-term when you think about it. For the Fed to achieve their inflation targets, they essentially need something that they can’t control, which is fiscal policy,’ Shah said. ‘Thinking about it from a market perspective and the implications there, credit spreads are relatively tight. Returns will be lower, and volatility could be higher because of idiosyncratic risk and investors being forced to reach for yield to generate income. I don’t think this is an environment where you want generic carry or generic spread exposure in your fixed income portfolio. Active management and security selection will still be important going forward and even more so now.’
Deflation vs inflation
Robert Balkema, senior director and head of multi-asset North America at Russell Investment, sings the same tune. He agrees that security selection will continue to play an important role in the credit space. ‘There’ll be more winners and losers,’ he said. ‘Around 80% to 90% of the overall risk of a fixed income portfolio, when you look at core fixed income, is driven by factors – whether that’s credit or rate factors. Trying to emphasize idiosyncratic drivers of return, as opposed to credit risk by a different name, is something that we’re focused on.’ In general, Balkema doesn’t expect the yield curve to steepen considerably: ‘We don’t think [the yield curve] is going to steepen that much, but no one is calling for 3.5% yields on 30-year government bonds in the next 12 months. We’re happy to take longer duration to offset some of our equity risks in portfolios.’ Todd Kerin, PGIM’s vice president for portfolio construction, can’t see rates going up any time soon either. ‘We’ve seen nothing that has moved us off that,’ he stressed. Instead, he believes that the current conditions provide a promising hunting ground for credit investors who can benefit from attractive spreads. ‘From a fixed income lens, we believe this is really the golden age of credit, not just because we saw the big widening of spreads right after Covid. Even now that spreads are closer to historical norms, we believe this is a good environment for credit.’
Learning the lesson
Covid-19 has highlighted the way fund managers communicate with their clients. Here, we look at the main features they are asked to demonstrate, what has been changing in the way they look at markets, and what portfolio managers expect from them in one of the hardest times for investing.
With the pandemic in full effect, selecting the right manager is more crucial than ever.
Do specialist managers really have an edge over generalists in times of turmoil? Bob Boyda put the question to the panel and incited a lively debate on the ins and outs of different management styles. Before diving into the pros and cons of separate management methods, however, the delegates turned to the challenges and opportunities in asset allocation these days – and what’s the best way to manage them. Andres Sanchez-Balcazar, head of global bonds at Pictet Asset Management, identifies the increasing correlation between traditionally uncorrelated assets as one issue.
‘What we are seeing is, given that everything has started to depend on the same trait, being the central banks providing ongoing amounts of liquidity, that correlations between those traditionally uncorrelated assets are getting higher,’ he said. He also made the case for a more convex approach to duration management and urged investors to ‘really search for convexity, to look at that decorrelation between duration or safe government bonds and credit and equities.’ Based on these two premises – the rise in correlation and the need for more convexity – Sanchez-Balcazar advocates portfolios that are ‘better balanced than your traditional Global Agg index, in convex positions and negatively convex positions.’
For Sanchez-Balcazar, BBB-rated industrial longer duration bonds in the US are a ‘sweet spot’ for credit. ‘That’s where you find some convexity, and you are actually getting paid better spreads than in the shorter end of the credit curve,’ he said. Dollar-denominated Chinese property companies are on his list too. China’s urbanization trend means that property developers need financing, which spells opportunity for credit investors, who can benefit from spreads ‘between 5% and 10% or even more.’ Sanchez-Balcazar is also eyeing the lower-rated part of the emerging markets sovereign debt space. This includes countries that are small enough to cut quick deals with the IMF and already receive financing from China, for example via the One Belt One Road initiative. ‘So many of these countries find themselves almost for China and the IMF fighting to give them financing, and we find that very interesting. They’re producers of commodities. So, you also are exposed to some of that through many of those countries. I’m talking about, in the extreme, Sri Lanka, but Ghana, the Cameroons of this world, where there are very interesting levels of spreads and you get exposure to these macro themes,’ he said. To a lesser extent, he is also interested in the periphery of the eurozone where lower yield levels tend to come with steeper curves. This includes countries like Italy, Portugal, and Spain, which can provide a decent return over cash than a more traditional market-weighted allocation. For Nilay Shah, risk-adjusted carry, especially on the investment grade side, plays a major role in fixed income portfolios. The manager research analyst at SEI also tries to identify areas of the market that are either underrepresented or capacity-constrained and can compensate investors for illiquidity or some type of structural complexity. ‘This is where specialist knowledge about the collateral backing these types of securities can really make a difference and provide an edge, relative to other managers in the space who are much larger,’ he said.
More bang for your buck
On the more traditional side, Shah favors asset-backed securities, including agency and non-agency MBS. The former provide a relatively stable and defensive source of portfolio income and continue to benefit from Federal Reserve involvement, while the latter offer seniority in the capital structure, as well as ‘some downside protection in the event that you do have some negative macro or market surprises,’ he said. Based on the spread differential, high yield is also on Shah’s radar: ‘Paradoxically, you have a market that’s getting better from a quality perspective due to fallen angels and an IG market that’s actually getting worse due to increased leverage.’ Emerging markets, on the other hand, are a different story. Gina Toth, executive director, senior investment officer and portfolio manager at UBS Global Asset Management, is slightly more neutral on emerging market equities but favors external emerging market debt, particularly in Asia. ‘We think China bonds are very attractive. Given their nominal yields and their relatively more defensive characteristics, it’s an interesting place to look. We also think that they’re going to benefit from inclusion in bond indices, which will help to narrow spreads, giving them a little bit of a tailwind,’ she said. So far, she hasn’t allocated to China bond-only strategies, though. ‘They tend to be more of an opportunistic allocation within strategies with broader mandates,’ Toth said. What impact does this variety of opportunities have on the manager selection process, then? Are generalists or specialists better equipped to navigate the realm of fixed income? The short answer: it depends. ‘Within core fixed income, you can find a manager that’s doing multiple things at once, given that it is a multi-sector asset class at the end of the day and there is value in sector rotation,’ Shah said. ‘If you’re looking at, let’s say, an ultra-short or short duration portfolio where you have a Treasury or cash benchmark, I think having more of a specialist approach makes sense.’
For Pictet’s Sanchez-Balcazar, globality is key: ‘The less constraints you have, the better. The more freedom you have to rotate tactically around the world for those opportunities, the better. I would say, your manager needs to be truly global. A manager that has a regional bias will find it harder to find opportunities.’ Robert Balkema, senior director and head of multi-asset North America at Russell Investment, describes his methodology as a ‘specialist model with exceptions.’ He is looking for a manager’s ability to ‘move capital around enough and to not just make a risk-on/risk-off call with a lot of details and storytelling behind it. We want to see someone that is able to go in niche areas and be nimble, and that’s hard to find.’ Balkema uses specialists in areas like high-yield, securitized and investment-grade credit. Todd Kerin, vice-president for portfolio construction at PGIM, tends to ask for specialists as well. From an asset allocation standpoint, he leans toward small-cap and value-type trades. ‘We’re not the type of asset allocation manager to take big bets, but most of our portfolios now are moving to overweight equities. We’re getting more risk-on across the board, whether it’s credit and moving from credit into high yield or moving from this growth trade that’s been in place for so long, to the value side. We’re moving into that recovery stage of the economic cycle.’
Getting global
The panel gives their take on how the manager selection process has changed and what traits to focus on now.
With the Covid-19 crisis continuing to disrupt global economies and markets, selecting funds managers has become less about the mechanics of their stock-picking process and more about portfolio construction and the investment edge they have that will help drive returns.
Stock markets have offered up a rollercoaster ride this year due to the coronavirus pandemic, with managers having to navigate the fastest fall in markets ever recorded in financial history followed by a swift rebound. There have been stark winners and losers this year, and a spotlight put on how successful fund manager strategies have been during this turbulent year not just in terms of returns but how nimble they were in reacting to the opportunities. Nilay Shah, a research manager in the investment management unit at SEI, when looking to invest he searches for managers off the beaten path. ‘The qualitative part just comes from experience and being able to determine who’s insightful and who isn’t,’ he said. ‘The quantitative part really comes from looking at historical data and characteristics. Overall, I would say this type of analysis doesn’t lead you to a final opinion, but it does allow you to ask the right questions so that you can gather more relevant insights and come to a conclusion about whether what the manager is doing is unique.’ The key question for Gina Toth, senior investment officer and portfolio manager at UBS Global Asset Management, centers around what the manager thinks they are doing differently. ‘I really like it when a manager can very articulately delineate what they believe differentiates their strategy,’ she said. In asking this question, Toth said she is not interested in portfolio construction but rather, ‘I want to know what they’re good at,’ she said. ‘What is their edge? Do they have a particular experience in their background that gives them unique insight; do they have very strong street relationships.’ Secondly, Toth always asks a manager what their worst trade was and what they learnt from them. ‘Humans are compilations of their experiences,’ she said. ‘I can’t tell you how many times I have asked that question and managers struggle to tell me something that they’ve lost money on. That leaves me to conclude either they don’t really have any real experience or they’re simply afraid to admit that they’ve made mistakes.’
Toth said she assigns ‘bonus points’ to those managers ‘who actually tell me they can’t do something very well’ as it shows an introspection about their process. ‘They’ve thought about what they do well and what they don’t do well and they’re not willing just to do something for marketing purposes,’ Toth said. ‘They’re truly interested in adding value for clients and willing to stick out from the pack.’ The Covid-19 crisis has undoubtedly turned the spotlight on managers. Shah said it has given him an opportunity to assess how quickly a manager responded to the downturn and subsequent rebound. He said it was important to understand how managers ‘adjust the risk profile of their portfolio from the top-down while still monetizing their high conviction ideas in a risk-controlled way.’ With volatility spiking this year, Shah said managers were ‘easily caught offside’ and those ‘who are more deliberate in calibrating their exposures in the context of a bottom-up framework tend to navigate these types of markets better.’ Robert Balkema, Russell Investments head of multi-asset for North America, said while he was trying not to ‘overreact’ to the current environment, it does provide an opportunity to assess managers’ ‘nimbleness’ and the ‘flexibility and adaptability’ of their process. ‘We’re all dealing with a great deal of uncertainty in a world that nobody has been through before and that happens all the time, but how the process reacts to that, how individuals are steady or capitulating, we can see,’ he said. Ultimately, Balkema wants to ensure a managers’ process is ‘sound, working, and repeatable’, and allows them to react to dislocations in the market, of which there have been myriad this year. By ensuring a process is repeatable and works in a crisis, selectors for multi-manager portfolios can ensure managers are not ‘one trick ponies,’ according to Todd Kerin, vice president of portfolio construction at PGIM. He said PGIM has developed tools to ‘strip out all the idiosyncratic risks’ and ‘really get down to manager skill and whether the manager is just a one factor, one trick pony.’ He added: ‘Does that manager really have skill, and have they been nimble through this Covid-19 crisis?’ Once the broader factors propelling returns are stripped out, Kerin said all that is left is ‘the positive alpha’ delivered by the manager and this should be multi-managers’ focus. ‘As we keep stripping the onion and getting rid of those factors that are really driving returns you might have this very little bit left that is a residual, but if that is consistently positive, then that’s what we’re looking for,’ he said. Doing this ensures a multi-manager is not ‘going in blind’ to a rotation, like the one that is poised to finally happen as markets push from growth into value.
Admitting mistakes is key
Toth said mitigating factor risks in portfolio construction has meant ‘enhancing security selection as the main driver’ of returns. ‘That has led us to focus on more higher-conviction strategies – strategies that are high active share – and where we can maintain high active share at the multi-manager portfolio level,’ she said. She has also moved away ‘dogmatic managers with narrow opportunity sets’ and incorporates more ‘flexibility’ by diversifying the portfolio in terms of management style and time horizon.
No fan of dogmatic managers
Toth likes to combine managers who are looking at a certain time horizon with managers that are ‘more tactical, a little bit more dynamic in terms of how they manage their portfolio. Together, they should help smooth out returns over time and allow you to stay invested in those really idiosyncratic managers.’ Andres Sanchez-Balcazar, Pictet Asset Management’s head of global bonds, agreed that multi-managers cannot ‘depend on one single alpha source’ and factors need to be diversified. He said portfolios needed a ‘balance between convex trades, or trades that work well when markets are under stress, and non-convex trades: trades that work well when the economy is doing well and there is ample liquidity.’ There are also a number of specifics that Sanchez-Balcazar examines, including sizing of positions in portfolio as ‘managers are very good at overestimating our skills and, therefore, overestimating our degree of conviction is very easy’ so sizing should be in line with obtaining diversification. Managers should also be able to explain what the maximum drawdown they are expecting to have ‘because at some point we’ll get it wrong and hopefully, when we get it wrong, but not so badly that we’re out of the game,’ he said. The capacity for a rebound when markets do fall is also critical and Sanchez-Balcazar wants to know what ‘kinds of freedom your portfolio gives you to withstand that shock and then add risk when the valuations are more interesting.’ He said the days are gone when managers would make ‘one big call’ on currency, for example, and the fund management picture is far bigger. ‘[Those days] are over and the environment we’re in is very unpredictable… so the old days of forecasting GDP and then getting the rate call right, we believe that’s over and therefore the emphasis now is on portfolio construction,’ Sanchez-Balcazar said.
Has the pandemic swung the pendulum for rates for good?
The onset and ongoing upheaval caused by Covid-19 has been cause for some deep thinking in the macro investor community. Just as we have all reflected upon the potential paradigm shifts resulting from the pandemic, we have asked ourselves about the continued validity of our long-term investment themes. In this piece we reaffirm our conviction in our investment theme, ‘Rates Low for Long’, and the continuation of a long term trend that has held true over the past four decades. The pandemic brought with it unprecedented spending by governments across the world, whether affordable or not. To that effect, the Rubicon of simultaneous monetary and fiscal easing seems to have been crossed in record order, even though the big minds in economics had been debating for years as to whether MMT is viable, how to do it and who should attempt it first. Are we soon going back to the 1970s and 80s when interest rates and inflation were much higher? In short, are bonds truly done here? While rates across developed markets are already low and levels of stimulus are unprecedented, we do not believe that inflation is imminent or that the big bull run in interest rates is about to come to an end. Even if it is likely that markets breathe a sigh of relief over the course of the next year, as we emerge from the biggest shock to global growth since World War Two, the world has been hit by a huge deflationary shock; negative in many places in Europe, very low in Japan, peaking in China and stable in the US.
Revisiting the ‘Rates Low for Long’ investment theme
Long-term US inflation and bond yields, 1964-2020
It took the Fed several years to hike rates following the last recession of the Global Financial Crisis. We believe it would take the Fed even longer this time to move rates higher again given their new policy framework, the size of the Fed’s balance sheet and the fact that inflation is about half a percentage point lower than it was at the end of 2009. So while cyclical factors can be cause for some short-term repricing in rates, interest rates need to stay pinned for the foreseeable future to enable the much needed post-Covid recovery; there is little alternative. We are witnessing the end of the ‘Washington Consensus’, a term coined by the English economist John Williamson in 1989 to describe the standard cocktail of austerity, deregulation, trade liberalisation and sound money prescribed by the World Bank and the IMF to crisis-ridden emerging economies at the time. The Global Financial Crisis threw monetary policy orthodoxy out of the window and the pandemic has killed off any last semblances of traditional fiscal conservatism.
In her latest blog “Continued Strong Policy Action to Combat Uncertainty”, the IMF’s Managing Director Kristalina Georgieva encourages the developed world to continue the fiscal expansion and avoid a premature withdrawal of already unprecedented levels of policy support. At the same time she invites the world to prepare for a synchronised infrastructure investment push. The government’s share of the economy is set to continue to grow all over the developed world. What about inflation? We believe that the low growth-low inflation structural factors that have driven rates lower for longer in the developed world remain in place and in some cases have accelerated – an ageing population, growing debt burdens globally, and the inevitable integration of EM economies into the global value chain. Further, the debate in terms of policy has shifted with more burden on growth likely to be carried by fiscal levers. More fiscal doesn’t necessarily mean more inflation and although growth tends to accelerate with rises in government spending, its effects tend to be short lived. We would change our minds regarding our theme if at some point fiscal spending is directly financed by central bank money printing, bypassing markets and the financial sector, but there are prohibitive legal obstacles to do this in many countries. All of this means that central banks will likely have to keep bearing the burden, and as such we believe rates will stay lower for quite some time to come. Our conviction in ‘Rates Low for Long’ holds.
Global debt to GDP 1970-2020
Andres Sanchez-Balcazar is Head of Global Bonds at Pictet Asset Management and oversees a team of investors managing Pictet’s Absolute Return Fixed Income Strategy, a flexible and unconstrained approach to bond investing that aims to achieve positive returns in most market conditions.
Investment experts give their take on rate policy, manager selection in times of coronavirus and what’s in store for fixed income.
Crumbling economies, the increasing influence of China, a seemingly never-ending eurozone crisis – asset allocators have enough on their plates as it is, without having to deal with historically low interest rates.
How are investment managers navigating this low-rate wasteland? Bob Boyda, Manulife’s former multi-manager maestro, put the question to a five-strong panel. The delegates were: ● Andres Sanchez-Balcazar, head of global bonds, Pictet Asset Management ● Robert Balkema, senior director, head of multi-asset North America, Russell Investments ● Todd Kerin, vice president, portfolio construction, PGIM ● Nilay Shah, senior analyst, manager research, SEI Investments ● Gina Toth, executive director, senior investment officer and portfolio manager, UBS Global Asset Management While the participants dampened hopes for a swift end of the ultra-low rate environment and cautioned against the limited power of monetary policy, they also found some reasons to be optimistic. ‘It does seem as though we’re perhaps at the beginning of a rotation,’ Gina Toth says. The pros and cons of specialist versus generalist managers were also on the agenda. Do the former really have an edge over the latter in times of turmoil? The panellists gave some surprising answers.
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