RLAM head of credit Eric Holt has stressed the need for bond investors to focus on the visibility and deliverability of cashflows during challenging times.
Talking to Professional Adviser and Investment Week editorial director Lawrence Gosling as part of a new series of video interviews with the group's investment team, Holt said: "Reducing the volatility around cashflows is important, as is managing the portfolio according to the client's risk appetite."
At a time when prospective returns for fixed income are challenged, RLAM has included global high yield in its approach.
Azhar Hussain, head of global high yield at RLAM, said: "Markets and companies will introduce new instruments with lots of shiny new covenants and high coupons, but the most important thing is working out if that issuer is going to pay you back or not.
"Taking a step back and seeing the bigger picture is the most important part of the investment process."
Turning to their investment philosophy for fixed income, Jonathan Platt, head of fixed interest, said having a long-term view is important.
"I do think that investors generally have developed much too short a holding period for their investments. We very much see ourselves as lenders to companies.
"We are making a long-term commitment - they are in effect IOUs which we can exchange in markets but actually on day one you really have to go in with the mentality that we could be lending to this company for the next 5, 10, 15 years.
"Therefore, how happy are we and what protections have our clients got in that environment? So patience is actually a crucial virtue, but you also have to have that ability to admit when you have been wrong. It is a very fine balance and one of the key arts of fund management."
Holt adds it is important to be "a bit contrarian" adding that "markets feel wonderful at the top and lousy at the bottom. So if you go by sentiment in markets alone that is not a recipe for success".
Platt concludes: "One of the challenges we have in the fixed income team is how do you harness individual strengths and team strengths? How do you bring those things together to acknowledge the team is greater than the whole, but motivate individuals to make their own decisions?"
Click here to watch the other chapter in this Fixed Income series with RLAM
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