Fixed Income Strategies: Positioning during the New Wave

In this “lower rate for longer” environment, find out the positioning of our fund:

Higher overall modified duration which stands close to 8.3 and limited currency risk. The Fund’s average YTM stands at 3.35% now with a BBB+ average rating. ¹

• Currency component: Cautious positioning favoring the Euro and a light short exposure to the USD, as the US Covid-19 wave in the Midwest and the uncertainties could generate some volatility on the greenback. We are also maintaining a net short position on the CAD due to weak macroeconomic fundamentals and the lack of carry while we are maintaining a long position on both the CNH & AUD as both currencies are linked to Chinese growth. Fund’s main FX exposure: EUR 103% / USD -10% / AUD 8% / CAD -8% / IDR 5% / CNH 3% / Others -1%.
  
  

• Rates component:

o Reinforced long duration strategy with a diversified exposure to core rates between the US & Australia. o Decent allocation to EM external debt (Russia, Romania, Morocco) and Chinese local rates.

• Credit component: Long IG and more modestly HY. Physical allocation to some idiosyncratic names where we are well paid for the fundamental cost of risk on both primary and secondary markets. Tactical higher credit markets beta thanks to a short position on Xover CDS index (short indices CDS = long credit risk).
  
  
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¹ Source: Carmignac, 30/10/2020.