Plenisfer Destination Dynamic Income: A new unconstrained bond fund to capture the best of rising yields

In Kürze

In this article, Mauro Ratto Co-CIO and Lead Portfolio Manager introduces the new fund and explains why now is a good time to capitalise on short- to medium-dated government bonds, combined with compelling corporate bonds for yield enhancement.
"We aim to provide investors with a diversified portfolio that targets both income and growth, aiming for 4% average annualized returns over a typical market cycle."
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by Mauro Ratto

Co-founder, Co-CIO and Lead portfolio Managers at Plenisfer

Key Takeways

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The new Plensifer Destination Dynamic Income fund is a highconviction, unconstrained, goanywhere bond fund, that seeks to find ‘best-idea’ fixed income investments while navigating volatility.

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The fund invests according to three strategies: Income, Macro Opportunities and Special Situations.

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The manager believes that now is a good time to invest in the attractive yields offered by shortto medium-dated government bonds, combined with compelling corporate bond yields.

A new unconstrained fixed income fund to capture the best of rising yields

Mauro Ratto introduces the new Plenisfer Destination Dynamic Income fund

Bond investors are facing a critical juncture. We are nearing the end of the interest rate hike cycle, as signposted by the US Federal Reserve, which has suggested that we are likely at the peak. In my view, we will not return to the era of negative interest rates, and at Plenisfer we believe that inflation will be a rather resilient phenomenon, reinforced by higher energy prices and labor costs over the next few years. Higher inflation, and therefore higher interest rates, present opportunities for bond investors but require careful research and selection given we do not yet know at what equilibrium will settle at over the next five years.

For active managers like us, an uncertain environment such as this presents good hunting ground. We believe that now is an excellent time to invest selectively in the attractive yields offered by short- to medium- dated government bonds, combined with yield enhancement opportunities presented by compelling corporate bond spreads, particularly those in Europe.

This rare window of opportunity is why we have launched the new Plenisfer Destination Dynamic Income fund. The fund is a high-conviction, unconstrained, go-anywhere bond fund, providing us with the flexibility we need to search for ‘best-idea’ fixed income investments while navigating volatility. We aim to provide investors with a diversified portfolio that targets both income and growth, aiming for 4% average annualized returns1 over a typical market cycle.

In this fund, that looks like investing according to three strategies:

  • Income: Investing in investment grade debt, high yield, hybrid bonds, contingent convertibles and convertible bonds;

  • Macro Opportunities: Top-down investments that reflect our view of the world in terms of interest rates, currencies and sovereign spreads; and

  • Special Situations: Specific and uncorrelated investments generated by specific factors in stressed and distressed debt.

In this way, we aim to manage fund performance anti-cyclically, analysing individual risk premia across various types of credit and guided by the evolution of the economic cycle, rates and currencies.

Combing the globe for the best investment opportunities

While the European Central Bank’s stance on whether we are at the peak of the rate hiking cycle remains slightly more uncertain than the Federal Reserve, we believe European corporate bonds offer significant advantages compared to other regions. Leverage in European corporates is low, especially within investment grade. At the same time, European investment grade bonds spreads are at historically high levels, given the impact of recent market dislocations. Specifically, following the Credit Suisse crisis, European banks spreads widened to compensate investors with higher yields. It is possible to invest across the entire capital structure of banks, taking varying degrees of risk while achieving substantial returns, which we believe is an extremely interesting opportunity.

We see substantial risk associated with the real estate sector, particularly in the Nordic countries. However, by carefully selecting companies with quality assets and low loan-to-value ratios, there may be potential to achieve returns ranging from 5 to 6%. In terms of government bonds, we view Italian BTPs, specifically the 2-5 year part of the curve, as attractive.

Looking further afield, we see plenty of opportunities in Latin America. Given the complexity of the region, it is harder to access for investors, requiring specialized expertise, skills, and knowledge.

We are also interested in Southeast Asia where Indonesia offers interesting USD returns. Emerging markets as a whole offer opportunities to enhance portfolio yields, and we like economies with strong fundamentals. After the strong recent performance in local currencies by Brazil, Mexico and Indonesia, we favor the risk-adjusted returns offered by USD bonds, both in the corporate and sovereign space.

In terms of duration, given the current inversion of the US 2-10 year Treasury rate, we hold a steepening stance in the portfolio. We expect the normalization of the yield curve to generate strong returns.

Outlook: Stay flexible

Looking at the recent market events, we think that the fragility of the financial system imposes a ‘pause for reflection’ on central banks, stuck in the dilemma between managing system stability and fighting inflation. In the short term, the risk of recession is growing stronger, although a possible cyclical return of inflation cannot be excluded. That’s why we favour a cautious approach that balances short-dated government bonds with higher carry offered by quality crossover names and selective special situations. Given the uncertainty surrounding monetary policies and the slowdown in the economic cycle, we believe a flexible, unconstrained bond fund such as ours is well-placed to capitalise on the fixed income opportunities this environment presents.

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1 This is an internal expected target return and not a promise on performance as this target return is not guaranteed. The investment objective may not be reached and you may not get back your initial investment amount.

Important Information

This marketing communication is related to Plenisfer Investments SICAV, an open-ended investment company with variable capital (SICAV) under Luxembourg law of 17 December 2010, qualifying as an undertaking for collective investment in transferable securities (UCITS) and its Sub-Fund Destination Dynamic Income Total Return, altogether referred to as “the Fund”. This marketing communication is intended only for professional investors in Italy, France, Austria, Spain, Germany and Portugal, where the Fund is registered for distribution, within the meaning of the Markets in Financial Instruments Directive 2014/65/EU (MiFID) and is not intended for retail investors, nor for U.S. Persons as defined under Regulation S of the United States Securities Act of 1933, as amended.
This document is issued by Generali Investments Partners S.p.A Società di gestione del risparmio and Generali Investments Luxembourg S.A.
Generali Investments Luxembourg S.A. is authorised as UCITS Management Company and Alternative investment Fund Manager (AIFM) in Luxembourg, regulated by the Commission de Surveillance du Secteur Financier (CSSF) - CSSF code: S00000988 LEI: 222100FSOH054LBKJL62.
Generali Investments Partners S.p.A. Società di gestione del risparmio is authorised as Italian asset management company, regulated by Bank of Italy and appointed to act as marketing promoter of the Fund in the EU/EEA countries where the Fund is registered for distribution - Via Niccolò Machiavelli 4, Trieste, 34132, Italia - CM: 15376 - LEI: 549300DDG9IDTO0X8E20.
Plenisfer Investments SGR S.p.A. (“Plenisfer Investments”) is authorized as a UCITS Management Company in Italy, regulated by the Bank of Italy - Via Niccolò Machiavelli 4, Trieste, 34132, Italy – CM: 15404 - LEI: 984500E9CB9BBCE3E272.
Before making any investment decision, investors must read the Prospectus and the Key Information Document (“KID”). The KIDs are available in one of the official languages of the EU/EEA country, where the Fund is registered for distribution, and the Prospectus are available in English (not in French), as well as the annual and semi-annual reports at www.generali-investments.lu or upon request free of charge to Generali Investments Luxembourg S.A., 4 Rue Jean Monnet, L-2180 Luxembourg, Grand Duchy of Luxembourg, e-mail address: GILfundInfo@generali-invest.com. The Management Company may decide to terminate the agreements made for the marketing of the Fund. A summary of your investor rights (in English or an authorized language) is available at www.generali-investments.lu in the section “About us/Generali Investments Luxembourg”.
This marketing communication is not intended to provide an investment, tax, accounting, professional or legal advice and does not constitute an offer to buy or sell the Fund or any other securities that may be presented. Any opinions or forecasts provided are as of the date specified, may change without notice, may not occur and do not constitute a recommendation or offer of any investment. Past or target performance do not predict future returns. There is no guarantee that positive forecasts will be achieved in the future. The value of an investment and any income from it may go down as well as up and you may not get back the full amount originally invested. The future performance is subject to taxation, which depends on the personal situation of each investor and which may change in the future. Please liaise with your Tax adviser in your country to understand how your returns will be impacted by taxes. The existence of a registration or approval does not imply that a regulator has determined that these products are suitable for investors. It is recommended that you carefully consider the terms of investment and obtain professional, legal, financial and tax advice where necessary before making a decision to invest in a Fund.
Generali Investments is a trademark of Generali Investments Partners S.p.A. Società di gestione del risparmio, Generali Insurance Asset Management S.p.A. Società di gestione del risparmio, Generali Investments Luxembourg S.A. and Generali Investments Holding S.p.A. - Sources (unless otherwise specified): Plenisfer Investments and Generali Investments Partners S.p.A. Società di gestione del risparmio - This document may not be reproduced (in whole or in part), circulated, modified or used without prior written permission.

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