Introducing Dynamic Global Bond

July 2017
Arif Husain , Portfolio Manager

Effective 20 June 2017, the fund’s name changed from T. Rowe Price Funds SICAV—Global Unconstrained Bond Fund to T. Rowe Price Funds SICAV—Dynamic Global Bond Fund. This is a change in name only. The people, philosophy and management strategy remain exactly the same.

What is Dynamic Global Bond?

The fund has three aims, and I think it's really important to be clear on those objectives and those aims. The first aim is to generate some return. We target cash + 3% (EURIBOR + 3%). The second aim: capital preservation. It’s very important to fixed income investors that we don't lose money. The third objective is to provide diversification to our clients.

 

Fixed income used to play a role whereby when equities went down the bond portfolio went up. We're trying to recapture that quality by being a diversifier. Essentially what we're trying to do is: return, capital preservation, diversification—provide clients with a journey that they want from their fixed income portfolio.

 

We construct our portfolio across a few dimensions. The first dimension would be global. We're very agnostic, very nomadic in where we invest. The only bonds that get into our portfolio are ones that will either give safety or return characteristics. We don't follow a benchmark. We don't just own things because they’re in a benchmark. Again, very global, very far reaching.

 

Finding the Right Balance

 

The second characteristic I’d name is balance. Balance is very important to us because, again, the journey matters as much as the end point. To provide our three characteristics of return, capital preservation and diversification, that balance is very, very important to us.

 

The final characteristic I'll use about how we build the strategy is: we're active. We move our exposure around. It's largely government bonds so we have lots of liquidity. We move our exposure around taking advantage of that liquidity and that creates lots of opportunity for us.

 

I'm very privileged to have a very large team behind me. The global fixed income team is spread around the world and totals more than 150 associates. Specifically helping me manage this strategy are six other global portfolio managers. The world is a very big place, so I think a team approach is exactly the way you need to tackle that problem. We work very closely as a team covering the whole world looking for opportunity turning over all the stones wherever they may be in the world, again looking for either return characteristics or defensive characteristics from different markets.

 

A Different Kind of Absolute Return Strategy

 

I think the fund is different from other absolute return strategies in a number of different ways. We care about the journey as much as the end point. Broadly speaking, most absolute return funds focus on generating cash plus returns. They don't care what type of market they make those returns in, they don't care about the journey.

 

We think that it's really important to fixed income clients that when equities are doing badly, when everything else in a client's portfolio is selling off, their fixed income allocation does well for them. We really care about the journey and that helps us differentiate from lots of other absolute return strategies.

 

The final thing I'll leave you with in terms of differences against (other absolute return) strategies: we're a little bit more conservative.Again, we balance all our three objectives, return, downside protection and capital preservation. To do that means we give up some of the upside to protect to the downside, and I think that is a very important characteristic to highlight.

 

 

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