It’s not easy being a fixed-income manager these days.
The macro environment is shifting quickly, central bank transparency is becoming an issue, and trading has become much more correlated using the economic outlook. As a result, it’s increasingly difficult to get one-off, value-added opportunities to take meaningful positions in.
“You are really an allocator of capital within the fixed-income space, as opposed to a traditional security picker as with equity portfolios,” said Christine Horoyski, head of fixed income at Aurion Capital Management. “It’s about obtaining the trends right, recognizing the shifts in momentum, and repositioning your portfolio very tactically – that’s what adds a lot of value.”
For example, macro drivers such as the European Central Bank’s quantitative-easing program and it is purchases of corporate bonds produce a demand for high-quality corporates that spills outside the eurozone and into U.S. markets.
Horoyski noted that having such a massive buyer go into the market should tighten credit spreads through the high-quality, investment-grade sector. And that’s precisely what has occurred in the past month approximately.
“Some of it is a result of the commodity scare easing a little, but a lot of it\’s macro, such as the ECB taking corporate product from the market,” she said.
The Toronto-based portfolio manager noted that higher correlations are evident in credit spreads, which widen on liquidity and flight-to-quality fears (as was the case during the decline in commodity prices), after which uniformly tighten as buyers come in to pick up cheap opportunities.
Horoyski, who\’s responsible for almost $3 billion in fixed-income mandates for both institutional and retail investors is positioning her portfolios,?including the Dynamic Aurion Total Return Bond Fund and also the Aurion Income Opportunities Fund, against several broad themes.