Multi-Sector Absolute Return

Investment Objective

The Absolute Return Fixed Income Strategy is an actively managed, diversified strategy that seeks +300 bps of annualized gross excess return over the ICE BofAML 3-month LIBOR Index over a full market cycle.1,2 Unconstrained by a traditional benchmark, the Strategy seeks to capitalize on the Firm’s ‘best ideas’ by allocating assets across the full spectrum of global fixed income securities and currencies, while maintaining a duration profile similar to that of the cash-like benchmark.

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.

Available Vehicles

Available Vehicles

Separate Account

Collective Trusts

Mutual Fund

UCITS

Investment Philosophy

The Absolute Return Fixed Income Strategy’s philosophy is that diversified portfolios, built through the integration of macroeconomic research, credit research, quantitative research, and risk management can achieve consistent excess returns for clients with a high information ratio or Sharpe ratio. Risk budgeting is central to our approach. This same research-based and relative-value oriented process is implemented across all multi-sector, or broad market, fixed income strategies managed by PGIM Fixed Income.

The Strategy seeks to extract alpha from multiple sources through active allocation with a bias toward the global ‘spread’ fixed income sectors. Allocations are made within risk thresholds established by a ‘risk budget’ created specifically for each portfolio. The Strategy utilizes both top-down and bottom-up investment approaches:

  • Country, sector, and currency allocations are determined using both top-down and bottom-up approaches.
  • Subsector and security selections are based on bottom-up, fundamental research and relative value analysis.
  • Duration and yield curve decisions are primarily driven by top-down research

We seek to capture several market inefficiencies when investing across the global fixed income markets. Through our large internal research staff, we seek to anticipate both positive and negative economic and credit-related events before others. Using proprietary modeling, we also seek to capture aberrations in global yield curves. Finally, we seek to capture inefficiencies driven by supply/demand and other technical factors, such as a dislocation in spreads across different countries, sectors, industries, and even different maturity bonds or different parts of the capital structure of the same issuer.

Subsector Allocation:

160 bps

 

Security Selection:

100 bps

 

Duration/Curve/Currency:

40 bps

Investment Process

PGIM Fixed Income employs a disciplined, three-step investment process to manage Absolute Return Fixed
Income Portfolios

  1. Senior investment team assesses global market environment:

    • Economic research
    • Sector analysis
  2. Senior portfolio managers construct portfolio with sector specialists and analysts

    Risk Budgeting

    • Establish risk targets within client's risk budget

    • Capture thresholds for systematic and idiosyncratic risks
    Arrow Right

    Asset Allocation

    • Determine risk, sector, and term structure positioning

    • Incorporate themes given current market dynamics

    • Ideas from sector specialists are emphasized
    Arrow Right

    Security Selection

    • Sector specialists and research analysts aligned by industry determine individual securities

    • Research-based approach
  3. Senior portfolio managers and risk managers oversee risk positions

Senior Portfolio Managers

 

Michael Collins

CFA, Managing Director and Senior Portfolio Manager

 

Gregory Peters

Managing Director and Senior Portfolio Manager

 

Richard Piccirillo

Managing Director and Senior Portfolio Manager