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Return trajectories compared, for illustrative purposes only
Source: Pictet Asset Management
Broadly speaking, absolute return bond funds do three things that mainstream bond funds don’t usually do:
Invest across a broad range of countries, companies and currencies
Absolute return bond funds don’t restrict themselves to one particular category of bond investment. They spread their net far and wide, and seek out the best investments from the widest possible range of countries, companies and currencies. This is a clear logic to this: experience tells us that the more diverse our investments are, the easier it is to navigate the peaks and troughs of economic cycle.
Controlling risks as a way of achieving returns
Absolute return fixed income funds see return and risk as different sides of the same coin. They therefore attach a high priority to controlling the risks that come with bonds.It's an approach that can help minimise the volatility that investors typically experience from one year to the next.
Deploy sophisticated investment techniques
Because absolute return bond funds aim to shield investments from the worst effects of a market's ups and downs, they use financial tools that are designed to do just that. These tools – the majority of which are derivatives – have been used by professional investors for years as a way of controlling or removing unwanted risks when the economy or markets take a turn for the worse.
Because they focus on preserving capital during times of market stress, absolute return fixed income funds can lend much-needed stability to an investment portfolio.
Of course, absolute return fixed income funds aren't appropriate for all investors. They tend to be suitable for those who are willing to sacrifice some gains when markets are rallying as a trade-off for better protection during periods of turbulence. At the same time, it is possible that absolute return bond strategies might not deliver consistently positive returns over shorter time-frames.
Nevertheless, thanks to their many distinctive features, absolute return fixed income funds can lend much-needed stability to an investment portfolio. That's something investors shouldn't ignore.
Important legal information
This marketing document is issued by Pictet Asset Management. It is neither directed to, nor intended for distribution or use by any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, the KIID (Key Investor Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on assetmanagement.pictet.
This document is used for informational purposes only and does not constitute, on Pictet Asset Management part, an offer to buy or sell solicitation or investment advice. It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. The effective evolution of the economic variables and values of the financial markets could be significantly different from the indications communicated in this document.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.
The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.
Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or for any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.
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