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Pure Relative Value - The Third Lever of Fixed Income Breakfast
Wednesday 1st May 2024, 08:30-10:30
Ten Trinity Club, 10 Trinity Square, London EC3N 4AJ
The cio investment club, in association with Fidante and Ardea Investment Management, is holding an Insurance Investment Breakfast on Wednesday 1st May 2024 at Ten Trinity Club, Four Seasons, 10 Trinity Square, London EC3N 4AJ. (8:30am – 10:30am).
The breakfast is open to investment professionals who work within the insurance market and investment consultants. There will be a presentation from Gopi Karunakaran, Co-Chief Investment Officer, Ardea Investment Management, and the opportunity for peer discussion held under Chatham House Rules.
Presentation Title: Pure Relative Value – The Third Lever of Fixed Income
Insurance companies have weathered a prolonged storm of challenges that have strained both the asset and liability sides of their balance sheets, including repeated periods of macroeconomic uncertainty and volatile markets over the past several years. While the renewed investment landscape now looks more fertile for fixed income investors, the nuances of insurance portfolio management have become increasingly complex. Although bonds may play a bigger role as return-generating and income-producing assets than they did over the past decade, they may not play the same downside protection role for the time being. Compared to the pre-2020 era, investors are now potentially exposed to greater shocks from both growth and inflation in the long term. Fixed income investors face a similar dilemma, with corporate bonds suffering the same upward pressure on yields (downward pressure on prices) as government issued debt, but with greater potential for default This means the traditional levers of fixed income portfolio management – duration and credit – could suffer further volatility - potentially tarnishing their risk reducing benefits.
A lesser known, but nonetheless long-standing approach to fixed income is Pure Relative Value investing. Pure Relative Value investing does not rely on conventional fixed income sources of return and is not impacted by the level of bond yields regardless of whether they are high, low, or even negative. Nor is it reliant on corporate credit risk or a fund managers’ ability to forecast the direction of interest rates. Instead, a Pure Relative Value approach focuses on pricing inconsistencies between closely related securities – it offers investors a third lever.
The breakfast is open to investment professionals who work within the insurance market and investment consultants. There will be a presentation from Gopi Karunakaran, Co-Chief Investment Officer, Ardea Investment Management, and the opportunity for peer discussion held under Chatham House Rules.
Presentation Title: Pure Relative Value – The Third Lever of Fixed Income
Insurance companies have weathered a prolonged storm of challenges that have strained both the asset and liability sides of their balance sheets, including repeated periods of macroeconomic uncertainty and volatile markets over the past several years. While the renewed investment landscape now looks more fertile for fixed income investors, the nuances of insurance portfolio management have become increasingly complex. Although bonds may play a bigger role as return-generating and income-producing assets than they did over the past decade, they may not play the same downside protection role for the time being. Compared to the pre-2020 era, investors are now potentially exposed to greater shocks from both growth and inflation in the long term. Fixed income investors face a similar dilemma, with corporate bonds suffering the same upward pressure on yields (downward pressure on prices) as government issued debt, but with greater potential for default This means the traditional levers of fixed income portfolio management – duration and credit – could suffer further volatility - potentially tarnishing their risk reducing benefits.
A lesser known, but nonetheless long-standing approach to fixed income is Pure Relative Value investing. Pure Relative Value investing does not rely on conventional fixed income sources of return and is not impacted by the level of bond yields regardless of whether they are high, low, or even negative. Nor is it reliant on corporate credit risk or a fund managers’ ability to forecast the direction of interest rates. Instead, a Pure Relative Value approach focuses on pricing inconsistencies between closely related securities – it offers investors a third lever.
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