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Pictet AM's solution for active investing in Swiss bonds

March 2019

Active management

Aiming for steady positive excess return in all market environments.

In active strategies, our objective is to generate steady positive excess return, in every market environment, while targeting capital protection by limiting drawdowns. In order to achieve this, we have designed an investment philosophy tailored to the Swiss bonds market.

The Swiss bond market has unique characteristics such as high demand, a small number of market participants, strategic investors, a high sensitivity to systemic risk and lower volatility compared to other fixed income asset classes. We take advantage of these characteristics by considering only long-term themes, anticipating systemic risk and optimizing transactions costs.

In order to maximise chances of a steady positive excess return while limiting downside, we designed an investment process characterized as follows:

  1. Only implement strategies resulting from strong factual convictions.
  2. Only invest in mispriced securities after identification of catalysts driving market price back to fundamental value.
  3. Strongly focus on anticipation of credit events influencing solvency, rating and liquidity to avoid performance downside.
  4. Minimize trading costs thanks to an independent trading desk, best execution principles and crossing opportunities between the portfolios. 

The investment style is more strategic than tactical, fundamental and based on a strong capital protection discipline:

  1. Strategic: we focus on strategic active positions that reflect our anticipation of macroeconomic trends, systemic risk and credit events, typically with a three month time horizon.
  2. Fundamental: our level of conviction and the timing on an active bet are firstly and mostly driven by fundamental research.
  3. Disciplined: we tend to exit a position early when the level of conviction diminishes due to changes in the underlying fundamental factors.