The investment objective of the Global Core Strategy is to outperform Bloomberg Barclays Global Aggregate Index (the "Index") or similar index by +100 bps over a full market cycle.1,2 The Global Core Fixed Income Strategy seeks alpha from across the global fixed income sectors. The majority of issues are included in its benchmark, the Bloomberg Barclays Global Aggregate Index. The Strategy invests in debt securities of developed and emerging foreign corporations and governments (including supranational organizations, semi-governmental entities, or government agencies); in investment-grade developed market mortgages and mortgage-related securities; and in developed and emerging short-term and long-term bank debt securities or bank deposits. We look mostly for investment-grade securities denominated in U.S. dollars or foreign currencies but may opportunistically invest a portion of assets in non-investment grade, high yield bonds, if permitted by client guidelines. The Strategy may invest in derivatives to generate alpha and hedge risk exposures.
The Global Core Fixed Income Strategy’s philosophy is that diversified portfolios, built through the integration of credit research, quantitative research, and risk management, can achieve consistent excess returns for clients with a high information ratio. This same research-based and relative-value oriented process is implemented across all multi-sector fixed income strategies managed by PGIM Fixed Income.
The Strategy seeks highly diversified, sustainable sources of excess return across global fixed income sectors and currencies with an emphasis on managing downside risk. The Strategy’s approach focuses on relative-value based country and sector allocation, research-based subsector and security selection, and duration, yield curve, and currency management. The Strategy favors the credit-oriented sectors, reflecting the Firm’s significant research expertise.
The Strategy represents a culmination of our best ideas throughout the firm. We seek to capture several market inefficiencies when investing across the global fixed income markets. We seek to anticipate both positive and negative economic and credit-related events before others do, through our large internal research staff. To do so, we organize our macro-economic, portfolio management and research teams by region/sector/industry, fostering an in-depth knowledge of trends and individual companies, including ones not always followed closely by Wall Street. We also seek to capitalize on currency dislocations and aberrations in yield curves using proprietary modeling. Finally, we seek to capture inefficiencies driven by supply/demand and other technical factors, such as dislocations in spreads across different countries, sectors, industries, and even different maturity bonds, or bonds and loans, of the same issuer.
PGIM Fixed Income employs a disciplined, four-step investment process to manage Global Core Portfolios:
1. Top Down Risk Allocation:
Assess global appetite for risk to determine portfolio risk profile, leveraging firm's resources.
2. Asset Allocation - Global Rates, FX, & Spread Sector Allocation:
Determine country/term structure, currency, and sector positioning. Ideas from sector specialists are emphasized.
3. Security Selection & Relative Value:
Bottom-up research-based approach. Sector specialists and research analysts aligned by sector/industry.
4. Risk Management:
Employ a rigorous process to tightly monitor risk as all levels. Use proprietary tools to verify performance achieved is appropriate for risk taken.
1 There is no guarantee that these objectives will be met.
2 On average, over a full market cycle defined as three to five years.
No risk management technique can guarantee the mitigation of elimination of risk in any market environment.
Source: PGIM Fixed Income as of June 30, 2022.