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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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August 2022 / GLOBAL FIXED INCOME

Why Active Duration Management Matters

As market dynamics twist and turn, a flexible approach delivers results.

Key Insights

  • Having the flexibility to shift duration within a wide latitude enables us to be dynamic and to adapt quickly to different market environments, such as rising rates.
  • To uncover the best opportunities for our clients, our country selection is supported by our global research platform, covering both developed markets and emerging markets.
  • Since inception, our duration views, country selection, and yield curve positioning have been the largest positive contributors to performance.

Among absolute return strategies, we believe that the Global Unconstrained Bond Strategy stands out as it seeks to provide not only regular returns in different environments but also diversification from risk markets. That means that during periods of volatility, when risky assets such as equities sell off, we strive to be a performance anchor. To help achieve this, we have a high‑quality bias—investing a large portion of our portfolio in high‑quality government bond markets where liquidity is typically better. But it’s not just a case of being long sovereign bond duration at all times as that simply won’t work when interest rates are rising like they did in the first half of this year. That’s why we manage duration actively and within a wide latitude—an approach that enables us to adapt to changing market conditions. This has been critical in 2022, so far, and we believe it will continue to be, given the likelihood that volatility persists as fixed income markets enter a new market regime without the liquidity support of central banks.

…we manage duration actively and within a wide latitude—an approach that enables us to adapt to changing market conditions.

Flexibility Around Duration Management

We manage duration dynamically and within a wide latitude, implementing both long and short duration positions. This gives us the flexibility to adapt to different market cycles and environments, including when rates are rising. For example, when interest rates are rising, we could move to quickly cut the portfolio’s overall duration (as low as minus one year) to minimize potential losses. By contrast, when rates are falling, we can increase overall duration to as high as six years to maximize possible gains.

Active Approach to Duration Management

(Fig. 1) Historical duration of the Global Unconstrained Bond (USD Hedged) representative portfolio

Active Approach to Duration Management

As of June 30, 2022.
Past performance is not a reliable indicator of future performance.
January 31, 2015 through June 30, 2022: Global Unconstrained Bond (USD Hedged) representative portfolio. Index yield shown is for the Bloomberg Global Treasuries Index. Periods of rising and falling yields have been determined as periods of changes in yields of 15 bps or greater.
The representative portfolio is an account in the composite we believe most closely reflects current portfolio management style for the strategy. Performance is not a consideration in the selection of the representative portfolio. The characteristics of the representative portfolio shown may differ from those of other accounts in the strategy. Please see the GIPS® Composite Report for additional information on the composite.
Source: Bloomberg Index Services Limited. Please see Additional Disclosures for information on this Bloomberg information. Analysis by T. Rowe Price.
Returns based on Dynamic Global Bond (USD Hedged) Composite. The Global Unconstrained Bond Strategy/Composite is advertised and marketed under the Dynamic Global Bond Strategy/Composite designation outside of Canada, but should be referred to as the Global Unconstrained Bond Strategy/Composite in Canada.

This dynamic approach to managing duration has been successfully applied during many changes in market trends and regimes since the strategy was launched:

2020—Concerns about pandemic and other risks to global economy

In 2020, for example, we kicked off the year with the portfolio’s overall duration in negative territory. We quickly pivoted in February and significantly increased duration as our health care analysts and economists flagged concerns about the spread of the coronavirus and the risks to the global economy. The changes—particularly moving from a short duration to a long position in U.S. duration—bolstered performance at a time of heightened volatility and a huge sell‑off in risk markets.

2022—Inflation pressures on the rise

Heading into 2022, we held the portfolio’s overall duration close to zero, anticipating that major central banks would become more hawkish to combat rising inflation pressures. Specifically, we saw potential for the withdrawal of liquidity support, which could mark the end of quantitative easing and the start of a new regime in fixed income markets. As such, we felt comfortable holding short duration positions in select developed market countries, such as the U.S. and UK, which worked well with global bond yields rising materially in the first half of this year as central banks responded to inflation by tightening monetary policy.

Crucial to our success in capturing changes in trends and regimes is the research of our senior economists and analysts, helping to identify inflection points in monetary policies and economic cycles.

Global Research Platform Drives Investment Ideas

(Fig. 2) Broad capabilities covering more than 80 countries

T. Rowe Price Fixed Income Capabilities

As of June 30, 2022.
Source: T. Rowe Price.

Tactical Opportunities vs. Long‑Term Investment

Our global research platform is the engine that powers our investment ideas. Our deep research capabilities enable us to uncover inefficiencies and exploit opportunities across the full fixed income investable base. Since inception, the portfolio’s investments have ranged from major government bonds to lesser‑known developing country bonds rated below investment grade.

Our deep research capabilities enable us to uncover inefficiencies and exploit opportunities across the full fixed income investable base.

The strategy is designed so that we can be nimble and take advantage of short‑term opportunities. In order to gain a holistic view of a country, analysts conduct in‑depth research into the following key areas: fundamentals, valuations, and technicals. At different times, any one of those factors may hold sway. For example, compelling valuations may lead us to implement a long position, while at another time, we might initiate a short position based on concerns over deteriorating fundamentals. Getting the timing right on what feature is likely to influence bond prices the most is essential. Italy is an example of a country where we have tactically gone short and long at different times during the strategy’s life.

Taking a long‑term investment view is also important. In smaller and less developed countries, in‑depth knowledge and research can go a long way. Taking the time to gain a deep understanding of a country’s economic prospects, politics, and policymaking can open up potential attractive long‑term investment opportunities that others miss or avoid because they do not have the resources to analyze the market properly. For example, we have been invested in local Serbian government bonds in the strategy since March 2015.

Since inception, our duration views, country selection, and yield curve positioning have been the largest positive alpha contributor in the strategy. Our ability to express these views on a range of different countries and be tactical in managing duration to capture trend changes and regime shifts has been the driver of this. That is why it is so important that we continue with this approach—particularly in the current environment, where volatility is likely to remain elevated as central banks tighten monetary policy at a time when growth is slowing.

Performance Table: Global Unconstrained Bond (USD Hedged) Composite

Periods Ended June 30, 2022. Figures Are Calculated in U.S. Dollars.

Performance Table

Past performance is not a reliable indicator of future performance.
Gross performance returns are presented before management and all other fees, where applicable, but after trading expenses. Net of fees performance reflects the deduction of the highest applicable management fee that would be charged based on the fee schedule contained within this material, without the benefit of breakpoints. Gross and net performance returns reflect the reinvestment of dividends and are net of all non‑reclaimable withholding taxes on dividends, interest income, and capital gains.
*Effective May 1, 2021, the benchmark for the composite changed to ICE BofA US 3‑Month Treasury Bill Index. Prior to May 1, 2021, the benchmark was the 3 Month LIBOR in USD Index. Historical benchmark representations have not been restated.
† The Value Added row is shown as Global Unconstrained Bond (USD Hedged) Composite (Gross of Fees) minus the benchmark in the previous row. Please see Additional Disclosures for information about this ICE BofA information.
‡ Since Inception January 31, 2015, through December 31, 2015.
Returns based on Dynamic Global Bond (USD Hedged) Composite. The Global Unconstrained Bond Strategy/Composite is advertised and marketed under the Dynamic Global Bond Strategy/Composite designation outside of Canada, but should be referred to as the Global Unconstrained Bond Strategy/Composite in Canada.

GIPS® Disclosure: Global Unconstrained Bond (USD Hedged) Composite

Period Ended December 31, 2021. Figures Shown in U.S. Dollars.

GIPS® DISCLOSURE Dynamic Global Bond (USD Hedged) Composite

*January 31, 2015, through December 31, 2015.
† Investment return and principal value will vary. Past performance is not a reliable indicator of future performance. Monthly composite performance is available upon request.
‡ Effective May 1, 2021, the benchmark for the composite changed to the ICE BofA US 3‑Month Treasury Bill Index. Prior to this change, the benchmark was the 3 Month LIBOR in USD Index. The change was made because the firm viewed the new benchmark to be a better representation of the investment strategy of the composite. Historical benchmark representations have not been restated.
§ Preliminary—subject to adjustment.


T. Rowe Price (TRP) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. TRP has been independently verified for the 25‑year period ended June 30, 2021 by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firmwide basis. Verification does not ensure the accuracy of any specific composite presentation. TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S., international, and global strategies but excluding the services of the Private Asset Management group. The minimum asset level for equity portfolios to be included in composites is USD 5 million and prior to January 2002 the minimum was USD 1 million. The minimum asset level for fixed income and asset allocation portfolios to be included in composites is USD 10 million; prior to October 2004 the minimum was USD 5 million; and prior to January 2002 the minimum was USD 1 million. Valuations are computed and performance reported in U.S. dollars.
Gross performance returns are presented before management and all other fees, where applicable, but after trading expenses. Net of fees performance reflects the deduction of the highest applicable management fee that would be charged based on the fee schedule contained within this material, without the benefit of breakpoints. Gross performance returns reflect the reinvestment of dividends and are net of nonreclaimable withholding taxes on dividends, interest income, and capital gains. Gross performance returns are used to calculate presented risk measures. Effective June 30, 2013, portfolio valuation and assets under management are calculated based on the closing price of the security in its respective market. Previously portfolios holding international securities may have been adjusted for after‑market events. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Dispersion is measured by the standard deviation across asset‑weighted portfolio returns represented within a composite for the full year. Dispersion is not calculated for the composites in which there are five or fewer portfolios.
The strategy utilizes on a regular basis a variety of derivative instruments such as (but not limited to) currency forwards, fixed income futures, interest rate swaps, credit default swaps, synthetic indices, and options on all mentioned instruments, primarily to hedge certain market risks associated with the strategy’s objective, to express directional opportunities on specific markets and to facilitate liquidity management.
Benchmarks are taken from published sources and may have different calculation methodologies, pricing times, and foreign exchange sources from the composite.
Composite policy requires the temporary removal of any portfolio incurring a client initiated significant cash inflow or outflow greater than or equal to 15% of portfolio assets. The temporary removal of such an account occurs at the beginning of the measurement period in which the significant cash flow occurs and the account re‑enters the composite on the last day of the current month after the cash flow. Additional information regarding the treatment of significant cash flows is available upon request.
The firm’s list of composite descriptions, a list of limited distribution pooled fund descriptions, and a list of broad distribution pooled funds are available upon request.
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

Fee Schedule

The Global Unconstrained Bond (USD Hedged) Composite seeks to deliver consistent fixed income returns through a flexible, dynamic, and diversified allocation to debt instruments from around the world. The strategy adopts a holistic and rigorous approach to risk management to clients on the downside and particularly seeks to provide adequate diversification at times of equity markets’ correction.(Created January 2015; incepted January 31, 2015).

Fee Schedule

*A transitional credit is applied to the fee schedule as assets approach or fall below the breakpoint.

IMPORTANT INFORMATION

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass.

The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.

It is not intended for distribution to retail investors in any jurisdiction.  

Canada – Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to Accredited Investors as defined under National Instrument 45-106. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.

© 2022 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the Bighorn Sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.

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