Bestinvest says
The OECD government bond and currency markets are among the most liquid markets in the world. Historically, funds that invest in these markets have tended to perform strongly during periods of falling inflation, risk aversion and currency volatility. The reverse also applies. Whilst this asset class has historically been more sensitive to an increase in inflationary expectations, the manager has a number of investment instruments at his disposal which can be used to protect the portfolio. The fund is managed with a more absolute return mindset than many peer group funds.
The investment process relies heavily on investment opportunities arising from economic events and government reactions to them. Research is undertaken to look across economies and markets to identify assets which are undervalued relative to their economic fundamentals. The key to the process is the ability of the fund managers to anticipate market developments and to invest in appreciating assets in advance of the consensus. The returns of the fund are in the form of income and capital generated by country, currency and duration selection as well as yield curve positioning. The fund will aim to outperform a hybrid index consisting of 50% gilts and 50% global bonds in plausible scenarios, but this will only be used as a guide when constructing the portfolio. Financial derivative instruments may be used and the managers are prepared to adopt a net negative duration position to protect capital or try and make gains when prices fall.