Fund overview
The Royal London UK Aggregate Bond Pooled Pension Fund is an actively managed portfolio which invests in a broad range of sterling denominated fixed interest investments. The fund represents an effective way of accessing the full skills and experience of RLAM’s fixed interest team in a single investment vehicle. The fund is benchmarked against the iBoxx Sterling Overall Index and aims to outperform this index by 1.10% per annum, gross of fees, over rolling 3-year periods within an acceptable risk framework. The fund will invest mainly in sterling credit bonds and UK government securities although the manager can hold other securities including overseas government bonds, index linked securities, non-sterling credit bonds and floating rate notes when thought appropriate.
Manager
Overall asset allocation is determined by Jonathan Platt. He is supported by Paul Rayner and Sajiv Vaid who have respective responsibilities for the government and credit components of the fund.
Jonathan brings a wealth of experience and leadership to the Fixed Interest team at RLAM. He joined the Royal London Group in 1985 and became Head of Fixed Interest in 1992. Jonathan has been instrumental in overseeing the development of the fixed interest process and remains committed to the management of client portfolios. Jonathan has an MA degree in Philosophy, Politics and Economics from Oxford University.
Investment approach
Central to the investment process is our belief that fixed interest markets offer inefficiencies that can be exploited by our experienced team. The fund aims to achieve outperformance from multiple sources (e.g. asset allocation, stock selection, duration and yield curve management, off-benchmark investing).
Asset allocation is derived from our quarterly economic review. Gilt positioning reflects a combination of top-down analysis based on our macroeconomic views and bottom-up stock selection. We believe that volatility in government bond markets is likely to persist and that the active manager can take advantage of pricing anomalies. We use our own pricing model to highlight attractive relative valuation opportunities in UK government bonds.
RLAM has an experienced credit team which firmly believes in its core philosophy of favouring “covenants, structure and security”. This means that we do not rely just on credit ratings; a key question for us is: “are we getting sufficient reward for the risk we are taking?” In practice this means that we hold credit bonds that are excluded from credit benchmark (e.g. unrated bonds, smaller issue size bonds, sub-investment grade bonds and non-sterling bonds) where we believe that valuations are attractive. Our approach allows us to focus on investing for the longer-term.
The fund will differ from benchmark weightings when we have strong investment views. Asset allocation, interest rate views and stock / sector selection within credit bonds will be the key risks within the fund. We firmly believe in credit diversification as a way of reducing single name credit risk.