Being unconstrained by traditional benchmarks enables Payden to search the world to create a ‘best ideas’ portfolio that reflects the most promising risk-adjusted opportunities around the globe.
As an unconstrained investment strategy, the Fund is not beholden to a benchmark. It is designed to be better able to navigate the complexities of the evolving fixed income landscape and changing economic environment than traditional benchmark aware bond funds.
Unconstrained strategies are typically managed to beat a cash or equivalent benchmark, rather than a bond index; this removes constraints around duration and sector positioning. The result? A Fund that has the flexibility to dynamically alter its investment mix to find the best opportunities across securities, duration and geography.
The Fund is managed using the Payden Absolute Return Investing – or PARI – strategy; the process focuses on constructing the portfolio from that combines top-down and bottom-up views, while emphasising income generation in its core positions.
In the current environment, professional investors are contending with falling interest rates in some economies and rising rates in others; falling interest rates may reduce a portfolio’s yield, while rising rates may negatively impact fixed income portfolios. This is particularly significant for traditional benchmark aware bond funds, which are exposed to rising rates and are less focused on delivering absolute performance.
Payden’s unconstrained approach enables the Fund to invest in the full spectrum of fixed income assets, of both long and short duration, providing a large degree of flexibility – as markets change, Payden can significantly change the portfolio. In other words, Payden can invest anywhere, anytime, to deliver on the Fund’s objective.
The Fund at a glance
- Typically holds a low duration bias
- Aims to make quarterly income distributions
- Diversified portfolio with up to 300 holdings
- Managed using Payden’s proprietary PARI approach
- Managed by a specialist investment house that is large enough to get access to new issues, but small enough to execute trades nimbly, using cash rather than derivatives
- Robust risk management process ensures that no single theme or risk factor dominates sector allocation or performance.