The Russell Investments Global Bond Fund has doubled its in-house exposure after adding a new “strategic positioning” tilt targeting sovereign bonds.
According a product announcement released late in October, the Russell fund – which manages about $1.5 billion via the NZ-dollar hedged version – now includes a ‘global adjusted real yield’ (GARY) strategy in addition to the existing in-house currency overlay.
After introducing GARY, the Russell positioning strategies’ target weight in the fund jumped from the previous 7 per cent to 15 per cent.
“Typically used in conjunction with third-party active managers, positioning strategies allow our portfolio managers to better reflect our strategic and dynamic insights in a precise and flexible manner,” the Russell product sheet says.
The GARY strategy was “designed to better align international interest rate risk within the Funds” with Russell’s “strategic beliefs”.
Under the strategy, Russell ranks real yield based on the 10-year government bond yield less the one-year inflation expectations of Australia, Canada, Germany, Japan, United Kingdom, and United States.
Russell says the GARY strategy would use futures to go long high-yielding sovereigns while shorting the lowest-yield countries.
“The strategy serves as another potential return source and strives to improve diversification given its historically low correlation to both credit excess returns, currency factor returns and the excess returns of the active managers in the Funds,” Russell says.
Following the change, Russell has also made slight adjustments to the weightings of five of the six external managers with the most significant move seeing the allocation to UK-headquartered firm Colchester drop from 24 per cent to 18 per cent of the fund.
Alister van der Maas, head of Russell NZ, said the fund was “actively managed… we make changes were we see opportunities”.
In September, Russell also made a raft of manager changes to its Global Opportunities Fund.
Meanwhile, the Russell fixed income research desk in Australia has been rearranged following the departure of senior analyst, Robert Moore.
Moore, who joined Russell in 2011, was replaced by colleague Clive Smith, van der Maas said.
“Clive has also had experience in the NZ markets,” he said.
Prior to joining Russell in 2003, Smith worked at Tower Asset Management.
While the move was unrelated to Moore’s exit, Russell also lost a senior equities researcher in September after James McSkimming left to take up a role at BT Financial Group.
“We’re recruiting for a replacement for James,” van der Maas said.