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SICAV

US Aggregate Bond Fund

Seeks to extract return from a broad spectrum of US debt securities.

ISIN LU0181329318 Valoren 1880489

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

4.20%
$414.1m

1YR Return
(View Total Returns)

Manager Tenure

7.99%
8yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.39
1.50%

Inception Date 07-Jun-2011

Performance figures calculated in USD

Other Literature

30-Apr-2020 - Brian J. Brennan, Portfolio Manager,
The U.S. Federal Reserve has gone to great lengths to address the liquidity disfunctions in markets, and unprecedented interventions have reduced the tail risk of the health crisis turning into a financial crisis. As we enter the rebuilding phase, we would look for dislocations in prices to rebuild high-conviction positions, selectively pursue the new issue calendar, and eliminate mispriced bonds with credit issues. As lockdowns ease, we would look to add risk in anticipation of a risk-relief trade.
Brian Brennan
Brian Brennan, Portfolio Manager

Brian Brennan is a portfolio manager in the Fixed Income Division at T. Rowe Price. Mr. Brennan has lead portfolio management responsibilities for the US Treasury, US Core Plus Bond, and Stable Value Strategies. He also is a member of the portfolio strategy team for T. Rowe Price's core and core plus mandates. Mr. Brennan is a vice president of T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., T. Rowe Price International Ltd, and T. Rowe Price Trust Company.

Click for Manager Outlook
 

Strategy

Manager's Outlook

The response to the novel coronavirus, i.e., social distancing and closing nonessential businesses, will likely lead to a deep, but short, recession in the United States. Recessions often entail the correction of market imbalances, but the current downturn is being driven substantially by an enforced pullback in activity rather than significant macro imbalances like previous recessions. With that in mind, we believe economic growth should rebound as governments ease containment measures. However, we do not anticipate a rapid return to previous GDP levels as the removal of social distancing restrictions is likely to be gradual to prevent new outbreaks.

We envision surmounting three peaks as we work through this crisis: (1) volatility and illiquidity, (2) the virus, and (3) the deterioration in economic data. The Fed has gone to great lengths to address the liquidity disfunctions in markets, and volatility appears to be coming off its highs. As we enter the rebuilding phase, we would look for dislocations in prices to rebuild high-conviction positions, selectively pursue the new issue calendar, and eliminate mispriced bonds with credit issues. As the virus peaks and lockdowns are eased, we would look to add risk in anticipation of a risk-relief trade. Eventually, when economic conditions stop getting worse, we would look to add higher-beta credit positions in an effort to position the portfolio for an early-cycle environment and an expected compression of risk premiums.

We have been looking for opportunities in new issue IG corporates. Securitized credit issuance has not yet restarted, and these markets have not kept pace with the rebound rally in other risk assets. We are seeing some positive signs in this regard on the back of the Fed's efforts to support market liquidity, which have boosted liquidity in the Treasury, agency MBS, and corporate markets. The expansion of the Fed's Term Asset-Backed Securities Loan Facility (TALF) program is also encouraging. However, until the health crisis shows signs of abating, we would expect continued market volatility, particularly in areas such as securitized credit where the Fed is currently not providing much direct support.

As always, we are committed to managing the portfolio thoughtfully through this period of uncertainty in the best interest of our clients. Our confidence in our rigorous fundamental research capabilities drives us to invest over the long term with conviction, despite near-term uncertainty.

Investment Objective

To maximise the value of its shares through both growth in the value of, and income from, its investments. The fund invests mainly in a diversified portfolio of US bonds.

Investment Approach

  • Focused primarily on investment-grade, U.S. fixed income securities.
  • Integrate proprietary credit and capital market research to identify market inefficiencies.
  • Add value primarily through sector rotation, individual security selection, and term structure position.
  • Exploit market inefficiencies through opportunistic trading conducted by specialist teams.
  • Seek to exceed benchmark return by at least 50 basis points annually over a 3 to 5 year period.

Portfolio Construction

  • Duration is managed within +/- 20% of benchmark
  • Sector exposure will typically range +/- 25% of the benchmark
  • Average credit quality of the portfolio is AA- or better
  • Tracking Error should range between 0.5% to 1.0% in most market environments

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 7.99% 4.20% 3.22% 3.21%
Indicative Benchmark % 10.84% 5.17% 3.80% 3.68%
Excess Return % -2.85% -0.97% -0.58% -0.47%

Inception Date 07-Jun-2011

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index

Data as of  30-Apr-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 5.22% 3.57% 2.61% 2.94%
Indicative Benchmark % 8.93% 4.82% 3.36% 3.51%
Excess Return % -3.71% -1.25% -0.75% -0.57%

Inception Date 07-Jun-2011

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index

Data as of  31-Mar-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 03-Jun-2020 Quarter to DateData as of 03-Jun-2020 Year to DateData as of 03-Jun-2020 1 MonthData as of 30-Apr-2020 3 MonthsData as of 30-Apr-2020
Fund % 0.30% 3.64% 3.16% 2.63% 0.38%
Indicative Benchmark % -0.24% 2.01% 5.22% 1.78% 3.00%
Excess Return % 0.54% 1.63% -2.06% 0.85% -2.62%

Inception Date 07-Jun-2011

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. 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. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

30-Apr-2020 - Brian J. Brennan, Portfolio Manager,
The portfolio outperformed its benchmark for the month. Our overweight position in investment-grade corporate bonds, along with an underweight to U.S. Treasuries, primarily drove relative returns. Corporates benefitted from news of the Fed’s enhancements to its asset purchase programmes. The Fed continued to augment its purchase programme in the corporate space and announced it would begin purchasing corporate bonds that had possessed investment grade ratings but have recently been downgraded to below investment grade along with high yield exchange-traded funds. Overweight allocations in agency mortgage-backed securities (MBS) and commercial mortgage-backed securities weighed on performance as spread compression was more muted in MBS and securitised credit. Overall security selection was also negative with the most significant drag coming in the investment-grade corporate sector, partially offsetting the contribution from our overweight allocation. Airlines and real estate investment trusts were among the other weakest areas of the portfolio.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 8.54% Was (31-Mar-2020) 8.43%
Other View Top 10 Issuers

Monthly data as of 30-Apr-2020

Holdings

Total
Holdings
1005
Largest Holding U.S. Treasury Bonds 3.57% Was (31-Dec-2019) 2.93%
Top 10 Holdings 10.81%
Other View Full Holdings Quarterly data as of 31-Mar-2020

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating BBB US Treasury
By % 17.15% -32.66%
Fund 29.41% 8.09%
Indicative Benchmark 12.26% 40.75%

Average Credit Quality

AA-

Monthly Data as of 30-Apr-2020
Indicative Benchmark:  Bloomberg Barclays U.S. Aggregate Bond Index

Sources for Credit Quality Diversification: Moody's Investors Service and Standard & Poor's (S&P) split ratings (i.e. BB/B and B/CCC) are assigned when the Moody's and S&P ratings differ. Short-Term holdings are not rated.

Maturity View maturity analysis

  Largest Overweight Largest Underweight
Maturity 5-7 Years 1-3 Years
By % 11.17% -15.42%
Fund 21.09% 14.80%
Indicative Benchmark 9.92% 30.22%

Weighted Average Maturity

8.04 Years

Monthly Data as of 30-Apr-2020
Indicative Benchmark:  Bloomberg Barclays U.S. Aggregate Bond Index

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration Under 1 Year 1-3 Years
By % 8.11% -11.62%
Fund 15.60% 28.07%
Indicative Benchmark 7.49% 39.69%

Weighted Average Duration

5.69 Years

Monthly Data as of 30-Apr-2020
Indicative Benchmark:  Bloomberg Barclays U.S. Aggregate Bond Index

31-Mar-2020 - Brian J. Brennan, Portfolio Manager,

In rates, we shifted to a moderately long duration posture in March given that near-term growth will slow materially and the Fed is responding with large-scale asset purchases. This posture also serves to offset credit risk exposure.

Marginally de-risked in March

During the market turbulence, we de-risked the portfolio on the margins on days when markets were stronger, mainly by trimming IG corporate exposure. Poor liquidity made it difficult to make large-scale changes to the portfolio's credit exposures.

Portfolio risk has become more concentrated in higher-spread, shorter-duration securities such as shorter-dated IG corporates and securitized credit as those sectors became dislocated during the market turmoil. Fed support should help the corporate sector retrace recent spread widening.

Given compelling valuations and a powerful Fed policy response, the current plan is to selectively increase risk as the pandemic and recession evolve. In the near term, we anticipate only a modest increase in risk.

Near quarter-end, we began to selectively purchase IG corporates as Fed actions helped to stabilize credit spreads and the new issue market reopened, offering opportunities to purchase bonds at some of the most attractive valuations we have seen in some time. In general, we are looking to rotate risk out of EM credit and into U.S. corporate credit given that the virus has not fully impacted emerging countries, and EM credit is more leveraged to commodity prices.

Sectors

Total
Sectors
7
Largest Sector Corporate 38.94% Was (31-Mar-2020) 36.73%
Other View complete Sector Diversification

Monthly Data as of 30-Apr-2020

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index

Largest Overweight

Corporate
By13.90%
Fund 38.94%
Indicative Benchmark 25.05%

Largest Underweight

U.S. Treasury
By-32.66%
Fund 8.09%
Indicative Benchmark 40.75%

Monthly Data as of 30-Apr-2020

30-Apr-2020 - Brian J. Brennan, Portfolio Manager,
Credit valuations are at recessionary levels and offer attractive long-term return potential. As the volatility eased in the corporate sector, we became more active in the investment-grade corporate new issue market and added to the portfolio’s corporate allocation over the month. We are working closely with our analysts to ensure that what we hold in the portfolio has more upside potential in a stronger recovery scenario and less downside if the economic recovery stalls.

Countries

Total
Countries
32
Largest Country United States 81.52% Was (31-Mar-2020) 83.74%
Other View complete Country Diversification

Monthly Data as of 30-Apr-2020

Indicative Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index

Largest Overweight

United States
By15.36%
Fund 81.52%
Indicative Benchmark 66.17%

Largest Underweight

SNAT (Supe Natl Wrld Global)
By-1.40%
Fund 0.00%
Indicative Benchmark 1.40%

Monthly Data as of 30-Apr-2020

Team (As of 21-May-2020)

Brian Brennan

Brian Brennan is a portfolio manager in the Fixed Income Division at T. Rowe Price. Mr. Brennan has lead portfolio management responsibilities for the US Treasury, US Core Plus Bond, and Stable Value Strategies. He also is a member of the portfolio strategy team for T. Rowe Price's core and core plus mandates. Mr. Brennan is a vice president of T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., T. Rowe Price International Ltd, and T. Rowe Price Trust Company.

Mr. Brennan has 33 years of investment experience, 19 of which have been at T. Rowe Price. Prior to joining T. Rowe Price in 2000, he was a fixed income manager with Howard Hughes Medical Institute, responsible for Treasury, emerging, nondollar, and derivative strategies for core plus. Mr. Brennan began his career at CIGNA Investments, Inc., as a portfolio analyst for immunized and indexed fixed income accounts.

Mr. Brennan earned a B.S. in economics and computer sciences and an M.A. in economics from Trinity College in Hartford, Connecticut. He also earned the Chartered Financial Analyst (CFA) designation and is a former president and treasurer of the Baltimore CFA Society.

  • Fund manager
    since
    2011
  • Years at
    T. Rowe Price
    19
  • Years investment
    experience
    34

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class I $2,500,000 $100,000 $0 0.00% 40 basis points 0.48%
Class Jd $10,000,000 $0 $0 0.00% 0 basis points 0.04%
Class Sd $10,000,000 $0 $0 0.00% 0 basis points 0.10%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. 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.

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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