Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Unconstrained Fixed Income

This provides the potential flexibility to capitalise on opportunities across the fixed income spectrum as and when they arise.

What is unconstrained fixed income

Traditional fixed income investing is often benchmark-oriented. This means the aim is to add value over a chosen index, regardless of if the index is moving up or down. These types of portfolios are usually built with reference to that index and can be constrained to a particular area of the fixed income universe such as a region, sector, maturity or credit quality.

An unconstrained – or ‘go anywhere’ - approach is benchmark-agnostic with portfolio construction generally based on growing income and capital without reference to an index. This provides the potential flexibility to capitalise on opportunities across the fixed income spectrum as and when they arise.

The focus is usually on aiming for risk-adjusted returns. In other words, trying to achieve a potential return for a given level of risk. It may therefore form a core bond portfolio for investors seeking moderate capital growth and income.

Why consider total return investing?

There are two components of the total return from a fixed income portfolio: yield – or income return from coupons – and capital growth of the assets over time.

1.
Holistic approach

Some bond investors focus only on the income element but in recent years historically low government bond yields are making it harder for traditional fixed income strategies to generate adequate income from lower-risk investments. Simply chasing higher yields may cause investors to ignore increasing risk in the portfolio.

Total return investing is a more holistic approach that considers both income return and capital return, rather than an individual component. Income received by the portfolio can be reinvested back into the underlying assets with the aim of maximising total return.

2.
Unconstrained total return

An unconstrained approach can lend itself well to generating potentially attractive total return. With the focus on flexibility and diversification, unconstrained fixed income investing aims to seek out opportunities for both income and growth across a broad range of fixed income securities while balancing the risks of different assets. 

Fixed income comprises a variety of sub-asset classes. Different bonds potentially have different performance and risk drivers. Performance of each sub-asset class is correlated to a different part of the economic cycle. The economic cycle is in constant motion so a portfolio needs to be able to adapt.

An active, unconstrained approach to fixed income investing can have the flexibility to use dynamic asset allocation and effective diversification to try and capture different performance drivers at the right time, while managing the associated risks.

Our total return fixed income strategy

AXA IM’s global strategic bond strategy is an active total return strategy that aims to take advantage of market opportunities and focus on downside preservation to deliver attractive risk-adjusted returns throughout the economic cycle.

As an unconstrained, flexible strategy it can allocate across the global fixed income universe (government bonds, inflation linked, investment grade credit, high yield and emerging market debt) and seeks to respond to different stages of the market cycle and allocate accordingly.

The investment process is based on our proprietary framework which breaks down the global fixed income universe in a simple and transparent way, according to risk factor sensitivity. The portfolio allocates across three risk buckets – defensive, intermediate and aggressive – allowing the Manager to adjust the Fund’s allocation depending on the market environment, to help mitigate risk.

Visit our fund centre

Visit our fund centre to find out more about our strategies.

Related Articles

Fixed Income

Global Short Duration UK strategy - July 2021

  • 10 August 2021
  • 7 min read
Fixed Income

Treasury yields fall again despite conflicting signals

  • 09 August 2021
  • 7 min read
Fixed Income

Time to think about the downside

  • 14 July 2021
  • 7 min read
FIXED INCOME

Discover more about fixed income investing

EXPLORE OUR FIXED INCOME STRATEGIES
Are you a financial advisor, institutional, or other professional investor?

This section is for professional investors only. You need to confirm that you have the required investment knowledge and experience to view this content. This includes understanding the risks associated with investment products, and any other required qualifications according to the rules of your jurisdiction.

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This promotional communication does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee that forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice.

    The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors.

    Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.