Holly Black: Welcome to the Morningstar Manager Check-Up. I'm Holly Black. With me is Evangelia Gkeka. She is from the Morningstar Manager Research team. Hello.
Evangelia Gkeka: Hello, there. Hi.
Black: So, you've got the three funds you've been reviewing the ratings on. Where would you like to start?
Gkeka: I would like to start with Jupiter Strategic Bond. So, for this particular fund we recently have been upgraded – this fund was upgraded to Gold from Silver. This particular fund is managed by very experienced portfolio manager, Ariel Bezalel, who has managed this fund since inception in 2008. He is supported by fund manager, an assistant fund manager, as well as an experienced team of credit analysts on the bottom-up idea generation. It is a well-defined process. The strategy has an unconstrained and high conviction style, is using a barbell approach with higher yielding bonds on one end and government bonds on the other end. So, the portfolio gets carry both from high yield bonds and in terms of volatility, the capital preservation bucket protects the fund on the downside.
Black: Okay. Let's move on to fund number two.
Gkeka: So, the second fund is Artemis Strategic Bond. The clean share class has recently been reaffirmed at Silver. Here we have a compact team which includes James Foster and Alex Ralph who have been working together for many years and managed this fund since inception in 2005. The team also includes an analyst which helps on the bottom-up idea generation. This is an unconstrained high-conviction strategy which combines top-down views and bottom up-elements and the split between investment grade and high yield is very flexible.
Black: So, how is it positioned at the moment to take advantage of where we are?
Gkeka: Sure. So, as I said, like in the previous fund, for this particular fund as well, long-term performance has been attractive against peers and the category benchmark. This year beginning of the year during the sell-off this fund was down approximately 5% as well as spread widened. So, exposure to high yield investment grade recorded losses in Q1. But high allocation to government bonds did positively contribute to performance. So, from mid-March onwards what we see happening since then is – so the key things they've done was to reduce the government bonds in the portfolio, mainly US treasuries from around 40% to now in September around 20%. So, this liquidity was used to increase investment grade allocation, mainly new issuance. So, the increase in investment grade combined with a high yield allocation were the main drivers behind the performance recovery in Q2 and Q3. So, the fund now is up around 3.1% as of end of September.
Black: Okay. And what is our final fund today?
Gkeka: So, the final fund is a BlackRock fund, BGF Euro Bond. This particular fund has recently been reaffirmed at Gold. Here, we have a different approach compared to the funds we discussed earlier. This one follows a disciplined and well-defined approach and is targeting to build a portfolio of diversified relative value bets with the aim to add value in a consistent and incremental manner. These relative value bets are combined with more traditional fixed income strategies, duration, beta and some currency plays.
Black: As you said, it's a Euro Bond, so that's focused on bonds issued in Europe. Does that add more risk because it's not as diversified?
Gkeka: So, what this fund – usually, what it's doing is successful tactical trading in a diverse set of trades and positions. For example, they have long biased to European credit, mainly new issuance, in high-quality industrials and banks, long government bonds in European periphery, securitized and covered bonds which also benefited from this spread tightening, and inflation-linked positions in Europe and the US contributed to performance as inflation expectations recovered from the low points.
Black: Fantastic. Evangelia, thank you so much for your time. For Morningstar, I'm Holly Black.
