“If you’ve got that [resource] you can shift portfolios and we do, fairly dramatically. If you don’t have that, what you find with an unconstrained or benchmark-unaware strategy is you have a permanent style bias that reflects your own inherent bias and then clearly it’s not global best ideas. It can’t be.”
He points out there is currently value in certain bonds and not others, with the reflation theme playing a key role. High-yield bonds and emerging markets are potential beneficiaries as default rates could fall further still, he contends.
He says: “What emerging markets really need is a better global growth environment, and they certainly have that at the moment. Our view is that capital is always attracted to where it gets the highest real return, and with the better global backdrop that’s likely to be emerging markets as opposed to developed markets. They should continue to attract that capital and their currencies would benefit from that.
“With our open-frame portfolios, a lot of our risk is in those reflation themes, those bonds that we think will do well. But again its back to this idea of not all bonds being equal.”
Looking ahead he suggests bond markets are very adaptable and while strategic or unconstrained bond funds will be part of the future, “they’re clearly not the sole thing”.
He says: “If strategic bonds do their job properly, they are something that should be able to reinvent themselves. You’ve got something that is flexible, unconstrained, can do pretty much what it wants, so it should be able to adapt for unfolding environments. It will be an interesting question in four or five years when economies look very different to now, the degree to which strategic bond funds have adapted and changed.
“We’re full service. We start from a good place as we’ve got a lot of resource – that’s key in bond markets. We’ve got a good footprint of people in different countries, and that’s important with the rise of emerging markets. One of the keys with bond markets is they seem to change a lot, maybe in a way other markets don’t. With fixed income, you have to keep at the forefront of that market innovation, and its one of the things that we try to work hard on.”
CV
Nick Gartside
2010 – Present
International chief investment officer of fixed income, JPMorgan Asset Management
2002 – 2010
Head of global fixed income, Schroder Investment Management
1997 – 2002
Fund manager, Mercury Asset Management/Merrill Lynch Investment Managers
