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SICAV

Global Aggregate Bond Fund

Risk-aware investing, exploiting inefficiencies in global bond markets.

ISIN LU0133095660 WKN 767368

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

1.24%
$473.3m

1YR Return
(View Total Returns)

Manager Tenure

6.22%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.13
1.14%

Inception Date 25-Jan-2006

Performance figures calculated in USD

Other Literature

31-Aug-2019 - Arif Husain, Portfolio Manager,
Ongoing concerns over global growth, geopolitical headwinds, and accommodative policy from major central banks mean that, in our view, the environment for core government bonds is improving. Further expected monetary easing in the U.S. and Europe could also support demand for risk assets. However, if data improves, there is a downside risk that the level of easing may not be as much as anticipated. Therefore, we continue to look for investments that can perform well in different market environments.
Arif Husain
Arif Husain, Co-Portfolio Manager

Arif Husain is head of International Fixed Income at T. Rowe Price. He is lead portfolio manager for the Dynamic Global Bond Strategies. Mr. Husain is also co-portfolio manager for the firm's International Bond, Global Aggregate Bond and Institutional International Bond Strategies. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Click for Manager Outlook
 

Strategy

Manager's Outlook

The rally in global government bonds witnessed in the second quarter confirmed the significant regime shift we have tried to express in the portfolio in recent months; major central banks are moving back into monetary easing mode. Expectations for multiple rate cuts, not only in the U.S. but also for the eurozone, are now priced in. This raises a potential question mark over the ability for U.S. Treasuries and German bunds to continue rallying, especially if economic data improve.

Credit markets, meanwhile, continued to reach new highs on the perception that major central banks will come to the rescue again. Recession risks and earnings deterioration seems to have been ignored so far by market participants. Indeed, the sell-off witnessed in May proved short-lived and was followed by a sharp recovery reminiscent of what we saw back in March 2018 and January this year, though we continue to believe that corporate bond valuations remain expensive. How global growth evolves over the next few months, therefore, will be critical. A stabilization could put core government bonds under pressure, while further signs of a slowdown could leave risk markets, such as equities, vulnerable to a correction. Against this backdrop, we will be monitoring economic data releases closely.

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 bonds of all types from issuers around the world.

Investment Approach

  • To generate a consistent performance over benchmark by exploiting inefficiencies in the full universe of the global fixed income and currency markets:
    • Focus on successful alpha generation.
    • Importance of effective risk management.
    • Target value added: 100-200 basis points per annum above benchmark over full economic cycle. (Not a formal objective and it can be changed without prior notice. Please reference prospectus for formal objective.)
  • Target average tracking error: Between 150 basis points and 300 basis points per annum.
  • Alpha generation classified under three main performance activities:
    • Currency Management: 35% Expected contribution to value added
    • Country/Duration Management: 35% Expected contribution to value added
    • Sector Allocation/Security Selection: 30% Expected contribution to value added

Portfolio Construction

  • Currency limit: maximum +/- 40% relative to benchmark
  • Weighted duration limit: maximum +/- 3 years relative to benchmark
  • Sub-investment grade: maximum 20%
  • Above investment grade: not restricted (includes corporates and emerging markets)
  • Portfolio holdings: between 400 and 600 issuers
  • Average credit quality: A- or better

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % 6.22% 1.24% 1.85% 2.51% 2.77%
Indicative Benchmark % 7.60% 1.59% 1.99% 2.34% 2.97%
Excess Return % -1.38% -0.35% -0.14% 0.17% -0.20%

Inception Date 25-Jan-2006

Manager Inception Date 13-Mar-2016

Indicative Benchmark: Bloomberg Barclays Global Aggregate Bond Index

Data as of  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 6.22% 1.24% 1.85% 2.51%
Indicative Benchmark % 7.60% 1.59% 1.99% 2.34%
Excess Return % -1.38% -0.35% -0.14% 0.17%

Inception Date 25-Jan-2006

Indicative Benchmark: Bloomberg Barclays Global Aggregate Bond Index

Data as of  30-Sep-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 07-Oct-2019 Quarter to DateData as of 07-Oct-2019 Year to DateData as of 07-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % 0.72% 0.72% 6.71% -1.54% 0.55%
Indicative Benchmark % 0.67% 0.67% 7.04% -1.02% 0.71%
Excess Return % 0.05% 0.05% -0.33% -0.52% -0.16%

Inception Date 25-Jan-2006

Indicative Benchmark: Bloomberg Barclays Global Aggregate Bond Index

Indicative Benchmark: Bloomberg Barclays Global 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.

31-Aug-2019 - Arif Husain, Portfolio Manager,
Core government bond yields fell in August as trade tensions between the U.S. and China flared up and concerns over global growth heightened. Against this backdrop, the portfolio’s overweight stance and steepening bias toward the U.S. Treasury curve make a strong contribution to relative returns. By contrast, our underweight to the eurozone held back relative returns. Poor economic data from Germany and expectations of further monetary easing by the European Central Bank (ECB) boosted the bloc’s bond prices. In currencies, our overweight position in the Japanese yen added to relative returns. Global growth concerns increased demand for perceived-haven assets such as the yen. The strong greenback, meanwhile, bolstered our U.S. dollar overweight positions against a number of emerging market currencies, such as the South Korean won and Hungarian forint. In sector allocation and security selection, our exposure to U.S. corporate bonds benefitted relative returns. By contrast, our European corporate bond selection dragged on relative returns, as did our short credit default swap position in a U.S. investment-grade index.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 58.06% Was (31-Jul-2019) 58.26%
Other View Top 10 Issuers

Monthly data as of 31-Aug-2019

Holdings

Total
Holdings
520
Largest Holding United Kingdom Gilt 5.52% Was (31-Mar-2019) 2.75%
Top 10 Holdings 36.09%
Other View Full Holdings Quarterly data as of 30-Sep-2019

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating Below Investment Grade A
By % 5.91% -10.29%
Fund 6.44% 15.32%
Indicative Benchmark 0.52% 25.60%

Average Credit Quality

AA-

Monthly Data as of 30-Sep-2019
Indicative Benchmark:  Bloomberg Barclays Global 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 10+ Years 1-3 Years
By % 5.93% -8.77%
Fund 31.18% 14.56%
Indicative Benchmark 25.25% 23.33%

Weighted Average Maturity

10.94 Years

Monthly Data as of 30-Sep-2019
Indicative Benchmark:  Bloomberg Barclays Global Aggregate Bond Index

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration 7-10 Years 1-3 Years
By % 3.90% -12.21%
Fund 16.34% 17.39%
Indicative Benchmark 12.45% 29.60%

Weighted Average Duration

7.92 Years

Monthly Data as of 30-Sep-2019
Indicative Benchmark:  Bloomberg Barclays Global Aggregate Bond Index

31-Dec-2018 - Arif Husain, Portfolio Manager,

The portfolio's overall duration was increased over the quarter driven in part by adding to high-quality countries, such as the U.S. and Australia. We also reduced the underweight duration position in the eurozone and moved the UK up to neutral. The changes reflected our expectations that slowing global growth, geopolitics, and trade tensions could fuel a flight into high-quality government bonds.

Country/duration positioning

  • Within developed markets, we began increasing the overweight duration position in the U.S. around mid-October. This was driven by expectations for growth to moderate and the Federal Reserve to slow the pace of interest rate hikes in 2019. Overall, our bias for a flattening of the Treasury yield curve stayed in place as inflation remained well behaved. In the eurozone, we added to Germany in the 7- to 10-year part of the curve and moved Italy back to neutral as budget concerns eased. The overall underweight duration position was reduced as economic growth continued to slow. Over the medium-term, we believe eurozone government bonds are potentially vulnerable as the markets have yet to price in the European Central Bank taking a key step toward monetary policy normalization at the end of 2018 when its quantitative easing program finished.
  • Among other developed market moves, we opened a new overweight duration position in Australia on anticipation that the central bank will keep interest rates unchanged for the foreseeable future, a factor we believe should be supportive for bonds. Meanwhile, in the UK, we closed the underweight duration position in mid-November on uncertainty surrounding the country's exit from the European Union. Toward the end of the period, we opened a new underweight duration position in Canada as we felt that the market was being too pessimistic on the outlook for interest rate hikes.
  • Our allocation to local emerging market bonds remained low during the quarter. In terms of moves, we reduced overweight positions in Mexico and Thailand and took profit on the off-benchmark position in Brazil. We also added modestly to our off-benchmark exposure in domestic Romania on anticipation that inflation pressures could recede. Throughout, we maintained overweight positions in Chile, and off-benchmark exposures in India and South Africa. To balance some of the risks, we maintain a negative bias in Eastern Europe through underweight duration positions expressed in Hungary and Poland.

Currency selection

  • On the currency front, we shifted to an underweight position in the U.S. dollar toward the end of the quarter. This was driven in part by adding to the overweight position in the Swiss franc and opening a new overweight position in the Swedish krona after the central bank raised interest rates for the first time since 2011 in December. Overall, we felt that with U.S. growth slowing and the Fed potentially delivering fewer hikes in 2019, the dollar could be vulnerable to a correction. In other moves, underweight positions in the euro and Australian dollar were closed. Throughout, we maintained an overweight position in the Japanese yen and underweight allocations to the Singapore dollar and Taiwanese dollar.
  • In emerging markets, we added tentatively to a select number of currencies. This included the Mexican peso, the Argentine peso, the South African rand, and the Malaysian ringgit. These complemented existing exposures in the Romania leu and the Colombian peso. The overweight position in the Czech koruna was closed.

Sector allocation and security selection

  • We maintain an allocation to hard currency emerging market sovereign debt as the income stream remains attractive. We also hold modest exposure to European high yield bonds.
  • To reduce portfolio risk, we continue to hold defensive positions in credit markets. The majority of this is expressed through short credit default swap positions in a U.S. investment-grade bond index. In emerging markets, except for Mexico, we closed the credit default swap positions at an individual country level in Turkey, South Africa, and Indonesia.

Sectors

Total
Sectors
6
Largest Sector Government 65.52% Was (31-Aug-2019) 66.09%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: Bloomberg Barclays Global Aggregate Bond Index

Largest Overweight

Government
By7.01%
Fund 65.52%
Indicative Benchmark 58.51%

Largest Underweight

Agency/Supranationals
By-7.81%
Fund 0.33%
Indicative Benchmark 8.14%

Monthly Data as of 30-Sep-2019

31-Aug-2019 - Arif Husain, Portfolio Manager,
We maintain low credit risk beta in the portfolio by using credit derivative instruments to act as insurance. We continue, however, to hold a modest overweight position in European high yield.

Countries

Total
Countries
48
Largest Country United States 34.52% Was (31-Aug-2019) 36.42%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: Bloomberg Barclays Global Aggregate Bond Index

Largest Overweight

United Kingdom
By7.54%
Fund 12.57%
Indicative Benchmark 5.02%

Largest Underweight

Japan
By-8.10%
Fund 8.39%
Indicative Benchmark 16.50%

Monthly Data as of 30-Sep-2019

31-Aug-2019 - Arif Husain, Portfolio Manager,
We increased our overweight duration stance to the U.S during the period, as concerns over global growth and the U.S.-China trade dispute continued to rise. In the eurozone, we increased our underweight duration bias, in particular by further reducing exposure to Germany and moving to an underweight in France. Despite increasingly dovish messaging from the ECB, we see little value in core eurozone bonds at negative yields. In Japan, meanwhile, we reduced our underweight duration bias as worries over the global economy increased.

Currency

Total
Currencies
32
Largest Currency U.S. dollar 46.49% Was (31-Aug-2019) 48.84%
Other View complete Currency Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark : Bloomberg Barclays Global Aggregate Bond Index

Largest Overweight

Israeli shekel
By 1.54%
Fund 1.67%
Indicative Benchmark 0.13%

Largest Underweight

Offshore Chinese renminbi
By -3.27%
Fund -3.27%
Indicative Benchmark 0.00%

Monthly Data as of 30-Sep-2019

31-Aug-2019 - Arif Husain, Portfolio Manager,
Through active currency management, we hold overweight positions in the Brazilian real, U.S. dollar, Swiss franc, Japanese yen, Israeli shekel, Indian rupee and Serbian dinar. These holdings are funded by underweight positions in currencies such as the euro, Australian dollar, Chinese yuan, Hungarian forint, Indonesian rupiah, South Korean won, Malaysian ringgit, Thai baht and Taiwanese dollar.

Team (As of 31-Aug-2019)

Arif Husain

Arif Husain is head of International Fixed Income at T. Rowe Price. He is lead portfolio manager for the Dynamic Global Bond Strategies. Mr. Husain is also co-portfolio manager for the firm's International Bond, Global Aggregate Bond and Institutional International Bond Strategies. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Husain has 24 years of investment experience, six of which have been with T. Rowe Price. Prior to joining the firm in 2013, he spent 14 years as director of both European Fixed Income and Euro Portfolio Management at AllianceBernstein. He was also a member of the global fixed income and absolute return portfolio management teams. Mr. Husain previously worked as assistant director of European Derivatives Trading at Greenwich NatWest and also traded interest rate swaps at Bank of America National Trust & Savings Association.

Mr. Husain received a B.Sc. (hons.) in banking and international finance from the City University, London Business School. He also has earned the Chartered Financial Analyst designation.

  • Fund manager
    since
    2014
  • Years at
    T. Rowe Price
    6
  • Years investment
    experience
    23
Quentin S. Fitzsimmons

Quentin Fitzsimmons is a senior portfolio manager in the Fixed Income Division of T. Rowe Price and a member of the global fixed income investment team. He is co-portfolio manager for the Global Aggregate Bond Strategy. He is actively involved in the discussion around country and duration positioning, currency management and sector allocation, with a particular expertise in interest rate management.

Mr. Fitzsimmons has 28 years of investment experience, four of which have been with T. Rowe Price. Prior to joining the firm in 2015, Mr. Fitzsimmons was head of liquidity portfolio investment management, Treasury markets, for the Royal Bank of Scotland Group, where he managed the liquid fixed income "tier one" capital on its balance sheet on an absolute return basis. Previously, he also worked as head of rates and as executive director of fixed income for Threadneedle Investments, where he ran global fixed income portfolios from 2002 to 2012. Prior to Threadneedle he held various fixed income portfolio management and research roles with F&C Investments, the Equitable Life Assurance Society and Sun Life Assurance Company of Canada.

Mr. Fitzsimmons earned a B.Sc. in economics and economic history from the University of Bristol.

  • Fund manager
    since
    2016
  • Years at
    T. Rowe Price
    4
  • Years investment
    experience
    28
Stephane Fertat

Stephane Fertat is a fixed income portfolio specialist for T. Rowe Price. He is a member of the Global Fixed Income team, supporting all global/international fixed income strategies. He represents the portfolio management team, presenting strategies as well as market outlooks in meetings and conferences. Mr. Fertat has broad knowledge of fixed income, currency, credit and derivative instruments - leading him to assist in the development of customized fixed income solutions - and he has helped launch a number of new strategies since joining the firm in 2007. Mr. Fertat is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Fertat has 22 years of investment experience, 12 of which have been at T. Rowe Price. Prior to joining the firm in 2007, he was employed by Fischer Francis Trees and Watts, a global fixed income asset management company, where he worked as a European fixed income fund manager before moving to a product manager role. Mr. Fertat was also a director of client service and business development for Southern Europe and worked previously at Societe Generale Fimat Investment Management in Chicago.

Mr. Fertat holds a master's degree in finance from Ecole Superieure de Commerce de Paris (ESCP-EAP). He also has earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    12
  • Years investment
    experience
    22
Christopher Dillon

Chris Dillon is an investment specialist in the Multi-Asset Division at T. Rowe Price. He provides broad insight across the various views that T. Rowe Price has across the Equity and Fixed Income Divisions. Mr. Dillon is also responsible for communicating how the firm's Multi-Asset team is allocating across asset classes from longer- and shorter-term perspectives. Mr. Dillon is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Mr. Dillon has 22 years of investment experience, 13 of which have been with T. Rowe Price. Prior to joining the firm in 2006, he was an investment advisory research consultant for PNC Advisors. Prior to that, Mr. Dillon directed fixed income management research for Smith Barney Consulting Group.

Mr. Dillon earned a B.A., cum laude, in history/economics from the University of Delaware and an M.B.A. in business administration from Wilmington University. He also has earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    13
  • Years investment
    experience
    22

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 75 basis points 1.07%
Class I $2,500,000 $100,000 $0 0.00% 45 basis points 0.53%
Class Q $15,000 $100 $100 0.00% 45 basis points 0.62%
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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