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Global macro investing: making the complex simple
Three words form the foundations of our long/short global macro strategy: simplicity, transparency and liquidity. Russel Matthews, Senior Portfolio Manager, explains how BlueBay’s Global Sovereign team is challenging the macro fund perceptions of old.
Traditionally, macro trading strategies were synonymous with black box investing, and consequently, they could appear opaque and complex to investors. When we designed the BlueBay Global Sovereign Opportunities Fund in 2015, our aim was to challenge these negative associations, de-mystify macro investing and build a conceptually simple product. By nature, what we do is complex and requires in-depth research and analysis. However, the macro themes we invest to are uncomplicated and the instruments that we target to achieve risk are – for the most part – plain vanilla government bond futures, interest rate swaps or benchmark cash securities. We always seek the best liquidity and most transparent bid-offer spread when selecting instruments, to express a view.
Our Global Sovereign investment team comprises 24 macro specialists, who focus on the universe of government bonds and currencies. The team is part of the broader BlueBay fixed income team, which comprises 128 investment professionals and manages over USD125 billion in assets under management1. The team is structured to deliver outcomes tailored to meet clients’ needs and operates according to a single investment process. We believe that having one team of specialists using this single investment process gives us a more holistic and nuanced approach to decision making.
For our team of long/short macro investors, our aim is straightforward: we seek to deliver absolute returns in all weathers, identifying the best opportunities regardless of market environment or fixed income asset class. There is no market or regional bias, and we take advantage of asymmetric risk wherever we find it. In sum, performance is a function of our skill, rather than the prevailing investment environment. In essence, the strategy targets returns by monetising macro volatility as a function of politics and policy, informed by our proprietary macro research.
Within the investment universe, we aim to deliver returns through three channels of risk: global interest rates, sovereign credit and currencies. Each of these alpha sources contributes roughly one-third of portfolio risk, however flexibility is integral to our investment process, and the strategy’s risk-return profile can be adjusted, depending on where the most compelling opportunities lie.
Transparency and liquidity are also integral to our investment philosophy, and we seek to be transparent, giving insight into positioning and how our market views are impacting these positions. Each week, a report is sent to clients detailing all the positions we are running, and how our macro directional views are evolving. Every month we send out a detailed pack of data giving full line-by-line insight into the performance of the strategy. Given that government bonds and currencies are typically liquid instruments, our investment approach is particularly liquidity conscious, and we use a disciplined risk management framework that emphasises liquidity and downside risk mitigation. At all times, we ensure the liquidity profile of the strategy matches the daily liquidity we offer investors.
Our wealth of experience enables us to perform a complex job well and in a straightforward way. With an average of 21 years of investment experience for team members2, we have built expertise during many credit and economic cycles, identifying long and short investment opportunities over time.
‘Policy and politics’ are integral to successful macro investing, and we meet regularly with policymakers and perform in-depth macro, policy and regulatory analysis to identify sources of alpha. Our top-down macro thematic conviction is based on deep fundamental country-level research and proprietary on-the-ground policy analysis, while individual risk exposures are based on well researched, medium-term structural investment decisions.
Focusing on these three clear cornerstones in our investment process has allowed us to generate compelling performance since inception and build a product which is a clear differentiator versus many of our peers. And as we enter the second half of the year, ongoing uncertainty and volatility will create an investment landscape that calls for a simple and transparent strategy, capable of generating positive returns in all market conditions.
1 As at 31 May 2024.
2 As at 31 May 2024.
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This document is a marketing communication and it may be produced and issued by the following entities: in the European Economic Area (EEA), by BlueBay Funds Management Company S.A. (BBFM S.A.), which is regulated by the Commission de Surveillance du Secteur Financier (CSSF). In Germany, Italy, Spain and Netherlands the BBFM S.A is operating under a branch passport pursuant to the Undertakings for Collective Investment in Transferable Securities Directive (2009/65/EC) and the Alternative Investment Fund Managers Directive (2011/61/EU). In the United Kingdom (UK) by RBC Global Asset Management (UK) Limited (RBC GAM UK), which is authorised and regulated by the UK Financial Conduct Authority (FCA), registered with the US Securities and Exchange Commission (SEC) and a member of the National Futures Association (NFA) as authorised by the US Commodity Futures Trading Commission (CFTC). In Switzerland, by BlueBay Asset Management AG where the Representative and Paying Agent is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich, Switzerland. The place of performance is at the registered office of the Representative. The courts at the registered office of the Swiss representative or at the registered office or place of residence of the investor shall have jurisdiction pertaining to claims in connection with the offering and/or advertising of shares in Switzerland. The Prospectus, the Key Investor Information Documents (KIIDs), the Packaged Retail and Insurance-based Investment Products - Key Information Documents (PRIIPs KID), where applicable, the Articles of Incorporation and any other document required, such as the Annual and Semi-Annual Reports, may be obtained free of charge from the Representative in Switzerland. In Japan, by BlueBay Asset Management International Limited which is registered with the Kanto Local Finance Bureau of Ministry of Finance, Japan. In Asia, by RBC Global Asset Management (Asia) Limited, which is registered with the Securities and Futures Commission (SFC) in Hong Kong. In Australia, RBC GAM UK is exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of financial services as it is regulated by the FCA under the laws of the UK which differ from Australian laws. In Canada, by RBC Global Asset Management Inc. (including PH&N Institutional) which is regulated by each provincial and territorial securities commission with which it is registered. RBC GAM UK is not registered under securities laws and is relying on the international dealer exemption under applicable provincial securities legislation, which permits RBC GAM UK to carry out certain specified dealer activities for those Canadian residents that qualify as "a Canadian permitted client”, as such term is defined under applicable securities legislation. In the United States, by RBC Global Asset Management (U.S.) Inc. ("RBC GAM-US"), an SEC registered investment adviser. The entities noted above are collectively referred to as “RBC BlueBay” within this document. The registrations and memberships noted should not be interpreted as an endorsement or approval of RBC BlueBay by the respective licensing or registering authorities. Not all products, services or investments described herein are available in all jurisdictions and some are available on a limited basis only, due to local regulatory and legal requirements.
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