Fixed income solutions at Metzler Asset Management
In the Fixed Income department, our specialists concentrate on analyzing and managing corporate bonds, covered bonds and government bonds–based on the results of long-term fundamental analyses. The aim is to filter out the bonds with the best ratio of creditworthiness to risk premium. Quantitative and qualitative factors are considered equally in order to be able to evaluate the investment spectrum from a holistic perspective.
What does "fixed income" stand for at Metzler Asset Management?
- A holistic approach combining top-down with bottom-up elements and quantitative with qualitative analysis methods
- A disciplined investment process and a high degree of responsibility borne by the fund managers
- Risk diversification by combining less correlated alpha strategies
- Experience in analyzing and managing corporate bonds since the emergence of the euro market in 1999.
The core element of our investment philosophy is a deliberately conservative investment strategy. We do not go for the short term–we focus on stable long-term value growth. In every investment decision we make, we always bear the client's level of risk tolerance in mind.
Our fixed-income management combines the many years of experience that all of our portfolio managers have with a disciplined investment approach. This enables well thought-out decisions to be made in the most diverse market phases– some of which may even be contrary to market conditions. Our clients can always rely on us to stick to our long-term approach.
Our portfolio managers think entrepreneurially. In a family-owned company like Metzler, characterized by a strong risk culture, the portfolio managers are risk-conscious but confident in their investment decisions. Our portfolio managers are also analysts–and their investment decisions are based on comprehensive primary research. Consequently, each portfolio manager bears the ultimate responsibility for his or her respective sector. They are also the direct contact persons for our clients.
Our fixed income management is based on well-founded portfolio management decisions aimed at ensuring long-term stable performance with our fixed income portfolios. Our active management is based on a transparent, structured and team-oriented investment process. We remain true to our style in all market phases because we have confidence in the long-term success of our strategies.
With this active approach, we aim to generate additional income and avoid losses
We combine quantitative and qualitative approaches to increase the chances that our strategies will succeed. These approiches support our portfolio managers in their discretionary decision-making process. We also use a broad investment spectrum to avoid cluster risks.
Decision-making in our fixed-income portfolio management is based on a clearly structured, systematic process. This process includes analysis of the various bond segments, sector and rating analysis, as well as fundamental issuer research. For analyzing bond segments, sectors and rating classes, we proceed "top-down" in order to determine their relative attractiveness. These analyses set the framework for weighting the individual bond segments, sectors and rating classes in our portfolios.
The results of issuer analysis: an important basis for selecting individual securities
Bottom-up research is initially based on a detailed fundamental analysis in which quantitative and qualitative factors are central to selecting issuers. In addition, we assess possible event risks, i.e. unforeseeable events that could have a massive impact on the financial situation of an issuer and/or worsen its credit rating. These results form the basis for selecting individual securities, but we also scrutinize bond terms and conditions as well as liquidity characteristics. At the same time, we take relative value aspects into account. Our portfolio managers combine fundamental analysis with an up-to-date assessment of the market's traded risk premiums for the issuer to identify the bonds with the best risk-/return profile.
Many large and medium-sized companies now finance themselves more and more through bonds - as classic bank loans have receded into the background. This trend is likely continueshaping the market for corporate bonds in the coming years.
In our corporate bond mandates, we invest in companies with strategically sustainable business models. Our active commitment is underpinned by the regular contact we maintain with companies in personal discussions. When selecting securities, we attach great importance to strict risk diversification. With our strategies, investors can benefit from our approximately 20 years of experience in corporate bond analysis and management.
Subordinated bonds, also known as hybrids, are an integral part of our corporate bond strategy. Their subordinated creditor rights, compared to the creditor rights of senior bonds,are reflected in higher yields . Especially in the current interest rate environment, this makes them an interesting option for European investors seeking higher returns without additional forex risk.
In addition, investors with this proprietary asset class can diversify their portfolios futher, as subordinated bonds have proven to have low long-term correlation to equities and other bonds. Measured by outstanding volume, the market for subordinated bonds has grown at an above-average rate in recent years and is expected to continue dynamic development in the future.
Covered bonds generally have a higher credit rating than corporate bonds, as they are protected by a cover fund. For many investors this is an important aspect in their investment decision. Since the last global financial crisis at the latest, it has become clear that this asset class lives up to its reputation as a high-quality investment product. Today, covered bonds are an important refinancing instrument for banks, and the programs of the European Central Bank also underline the importance of this investment vehicle. We use covered bonds in aggregate mandates, but also as an admixture in other bond mandates.
European government bonds
Here, our experts focus on European Union government bonds. As with our other fixed income market segments, we combine a top-down with a bottom-up approach, and quantitative and qualitative aspects are incorporated into the analysis. For example, our experts use a set of indicators from which a fundamental assessment of a country's credit risks can be derived. The indicators - including relative strength, default risk and sentiment - are calculated for different countries and different time periods. Qualitative aspects, such as the assessment of political risks, supplement the analysis.
The aggregate mandates that we manage for our clients mainly comprise corporate bonds, covered bonds and government bonds. The weightings of the individual segments and regions are based on top-down allocation decisions. The dicisions for selecting issuers and individual securities for the segments is made bottom-up based on the results of our fundamental analyses.
Global government bonds with the sovereign select strategy
The Metzler Sovereign Select strategy was developed in order to optimally exploit the potential of global government bonds. For our clients, itmakes sense to add them to other fixed-income strategies. The broad spectrum of global government bonds represents a wealth of different economic scenarios and interest rate structures in a wide range of countries. This opens the door to benefit from interest rate advantages and price upside. In addition, risks can be spread out through broad global diversification.
Through our Metzler/Payden joint venture, we offer additional global bond strategies.