Fixed income specialist Jamieson Coote Bonds is officially introducing its global fund to Australian investors following its initial seeding in early 2018.
The CC JCB Global Bond Fund has an investible universe which includes global sovereigns, semi-government, agencies and supra-nationals in the core G7 defined countries − Canada, US (North America), France, Germany, Italy (Europe ex-UK Core), UK and Japan, as well as satellite countries. It is also offered with the option to switch between Australian-dollar hedged (to $USD) and Australian-dollar unhedged.
Financial Standard first reported about the global strategy earlier this year. It is designed to be a diversity play among investors' fixed income asset allocation and "complement domestic risk asset exposures by helping to improve risk-adjusted returns, particularly at this time of uncertainty."
Jamieson Coote Bonds chief investment officer Charles Jamieson and deputy chief investment officer Kate Samranvedhya co-manage the fund. Jamieson said diversifying bond allocations to reach global markets can potentially enhance returns by adding a layer of currency risk.
"Investors with exposure to global high grade bonds ($USD) in 2018 would have achieved double digit returns on an unhedged basis, in a year of low to negative returns for most asset classes," he said.
"Recently, the Australian dollar has been performing as a risk proxy against roughly 70% of emerging markets currencies and seems deeply intertwined with the performance of the Chinese economy, given Australia's heavy reliance on China as a major trade partner."
JCB said it has actively managed its global strategy since February 2018. Its investment process relies on monitoring global markets and fundamentals, policy, politics and supply implications, to mitigate downside risk.
Speaking to Financial Standard recently, Jamieson said there is research to suggest the global interest rate hiking cycle will be the largest in 70 years on the back of the world's biggest debt loads.
"We've got consumer loans data in the US starting to tick up aggressively off 50-year lows," he said.
"This is a result of the lag effect of the credit market. When the Federal Reserve hiked interest rates in the start of June 2004, they hiked 425 basis points and finished in June 2006. We didn't have a crisis for another 18 to 24 months."
In this time delinquency rates picked up and this process has started again in the US. It's not unsurprising given that risk free rates have risen globally, Jamieson added. And all this is on "twice as much debt as we had going into GFC."
JCB currently manages $2.45 billion for both institutional and retail investors.