How important is fixed income to institutional investors? Huw Evans: It is linked to the maturity of our schemes. Many are looking to buyout within 10 years and that is driving the thinking around fixed income, which is a big part of their de-risking strategies. Ben Clissold: We are at the other end of the scale being an open scheme accruing £2bn of liabilities a year.
Although we are keen on hedging and taking the right amount of risk within fixed income relative to our liabilities, it is not possible to lock that down over such a long period because we are likely to be open for quite a while. Some of our sponsors have been around a long time, so there are a variety of views on where we should be on the risk-return spectrum.
The University of Oxford, for example, delights in telling us that they have been around 500 years longer than the gilt mar-
8 April 2022 portfolio institutional roundtable: Fixed Income
ket, so there is no need to hedge our interest rate and inflation risks because they will be here long after it has gone. Lloyd Thomas: I work on Border to Coast’s new multi-asset credit (MAC) fund. Our investors traditionally hold equities and gilts, and the MAC fund aims to help our partner funds to fill in the middle ground. This is an important element that needs to be built to expand our investors market exposure.
How are alternative fixed income assets performing? Mark Nash: I run a global macro fund, which can go long or short and access all areas of the fixed income universe. There is no benchmark, we try to outperform the underlying market. Now is our time with global bond yields rising. It has been a long time coming. Competing with long-only funds has been difficult. We have kept pace, but those guys can just sit in beta and perform.
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