Dynamic Global Bond Fund with Arif Husain
What does the fund aim to achieve?
Arif Husain – Head of International Fixed Income
The fund was specifically designed for the Australian market, so we came up with three things that really we aim to achieve: stable predictable income, protection to the downside, capital preservation, and finally, diversification to equity markets. So we have found that Australian investors have a fair amount of equity - either Australian equity or global equity. At the same time, the fixed income allocation that those Australian holders have has increasingly become a little more credit-centric. What that means is that when Australian investors really need the diversification that comes from fixed income, unfortunately some of that credit-centricity is going to be a little more correlated with equity. We have specifically designed our offering to really reduce that correlation to equity markets, and essentially deliver fixed income in a traditional fixed income way.
What's different about this Bond Fund?
I think the main differentiator of the strategy that we've developed for Australian investors is that it isn't just purely a credit fund. I think a balance of both credit instruments and government instruments will allow for more predictable sustainable income, whilst also providing some downside protection. Being dynamic is very important. We’re not tied to a benchmark, and what that really means for the investors in the fund is that we can move between countries, sectors within fixed income, wherever we find the best value at the right time.
The benefit of being truly “global”.
I think being global is key – just the number of opportunities as you go around the world is larger. And with a larger opportunity set, we’re going to find better value by looking in many, many different places. That’s the first thing. The second thing is, I think that different economies will grow and shrink at different times, and therefore there’s going to be a differentiating pace of rate moves, and rate falls at diferent times, and I think that there is a general perception across Australian investors and global investors, that interest rates are going to rise.
Every time I hear that perception from investors, I always push back and ask them, “which interest rate is going to rise? Which is the rate that you’re worried about?” And really to our mind, not every central bank is going to be raising rates at the same time. So there are going to be countries where you can hide out, during rising rate environments, and actually generate some very nice returns. Historically there’s been a big gulf between emerging markets and developed markets. People have considered them as different asset classes. We’re fairly agnostic between developed and emerging, what is really key to us are the qualities of those markets: their yield, their credit-worthiness and their ability to generate return for us.
Why T Rowe Price?
T Rowe Fixed Income is world renowned - it has great strength and depth, great experience, fantastic resources in research and portfolio management. It has a global focus, a very collaborative culture - and communication is key to be successful in global fixed income – and I think probably as importantly as all that, and something I really want to emphasise, is the risk culture within T Rowe Price. The focus on protecting client assets and especially downside protection is key.