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The New Capital Wealthy Nations Bond Fund is looking to access the best opportunities in sovereign and corporate debt across developed and emerging markets.
We use a foreign assets screen to determine the best opportunities, taking the net debt position for each country and dividing it by GDP. We then reorder countries according to this screen and avoid those with assets less than -50% of their GDP.
Our screen takes into account the assets and liabilities of the entire economy. This helps to looks past situations in certain countries where the financial system is overleveraged for example but the sovereign debt to GDP is low. These risks within the economy are important but are often overlooked by ratings agencies.
In terms of leverage, most analysts do not tend to consider assets as a way of offsetting debt. Japan is a good example: it has a high debt to GDP ratio – but a lot of its debt is within its domestic system. As most of the debt exposure is to the domestic economy, Japan’s exposure to foreign creditors is low.
We have a fundamental value orientation as we look for countries that are cheap, considering their credit ratings, and the average credit quality of portfolio holdings is high.
The Fund is suitable for investors looking to diversify their global fixed income exposure – we are invested in countries that are underweighted in the benchmark relative to their credit quality. We do this without sacrificing returns or taking on more risk – the fund has achieving both lower volatility and better performance than traditional portfolios and benchmarks.
Michael Leithead explains how the New Capital Wealthy Nations Bond Fund takes a smarter approach to Fixed Income investing
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Issued by EFG Asset Management (UK) Limited. Registered in England and Wales 7389736.Registered Office: Leconfield House, Curzon Street, London, W1J 5JB. Authorised and regulated by the Financial Conduct Authority.
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