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BLI’s bond management strategy seeks issuers which are engaged in the virtuous cycle of stable or improving issuer quality, rising credit ratings and falling cost of debt service. We do not consider issuers with deteriorating credit metrics – no matter how cheaply their bonds are valued.

Seizing opportunities globally – targeting issuers engaged in a virtuous cycle

Managing bonds: everything has changed!

Over the past 30 years, the predominant bond market environment was about structurally falling yields and rising bond prices. This trend has come to an end and an active investment strategy is required to generate positive returns in fixed income.

Our Fixed Income team has developed a multi-disciplinary research process with a combination of top-down and bottom-up risk analysis.

The credit analysis approach covers both emerging market and developed market issuers at the sovereign and corporate level. It is underpinned by a dynamic investment and review process. The team fosters a strong culture of communication and collaboration (notably through common work platforms). Our proprietary model combines qualitative and quantitative factors. It relies on diversified sources of value axed on three return drivers: duration, spread and currency.

The three dimensions of bond markets
Depending on the investment strategy implemented in BLI - Banque de Luxembourg Investments' funds, the fund managers may use one, two or all three dimensions to add value for their investors. The investment fund universes may consist exclusively of sovereign issuers of prime quality of the Eurozone or the United States. They may also consist of bonds issued by the developing countries often categorized in the emerging markets universe.

The team believes that both emerging market and developed market bonds can be subject to pockets of inefficiencies. Therefore, it remains opportunistic in its approach and benchmark-free as much as possible. This active investment approach is motivated by the end of the long trend of falling yields.

Regarding the fixed income range

Depending on the investment strategy applied to each of BLI - Banque de Luxembourg’s investment funds, the fund managers rely on one, two or all three dimensions to add value for investors. These investment fund universes may consist exclusively of prime quality sovereign issuers in the eurozone or the United States. They may also consist of credit papers from the emerging markets universe.

If you would like more information

Jean-Philippe Donge
Head of Fixed Income