Fixed Income Funds offer solutions for multiple investment topics such as hedging and yield enhancement or cost/income ratio management.
Quantitative Easing and lower yields have brought very large inflows into the Fixed Income asset class – while at the same time ever reducing the attractiveness of its returns for the risk taken by investors.
We are strongly committed to continue the expansion of our range in the Fixed income universe, complementing already existing defensive solutions like the High Yield Europe Defensive – aiming to enjoy some of the remuneration of high yield credit without bearing its full risk – or option-based strategies enhancing returns in government bonds.
Fixed Income Diversifier
THEAM Quant – Fixed Income Diversifier gives access to different sources of returns in the interest rates curve with risk control mechanisms, in a fully systematic fashion. The objective of the fund is to increase the value of its assets over the medium term, by being exposed to a global dynamic long/short portfolio of short-term money market rates and long term government bonds. The portfolio is built using a systematic selection of diversified sources of return in the interest rates markets while aiming at (i) keeping the objective of keeping the Sub-fund annual volatility at a target level of 4,5% and (ii) reaching market neutrality of the government bonds exposure.
The fund leverages on the most recent research on factor investing in fixed-income.
The BNP Paribas Quantitative Investment Strategies Lab team (QIS lab) has released a new research paper called carry and momentum in government based on the results of their extensive work on factor investing in fixed-income.
Bond Europe Climate Carbon Offset Plan
The THEAM Quant Europe Bond Carbon Offset Plan Fund aims to provide capital growth over the medium term and to offset its carbon footprint (Scope 1 and 2). It is exposed to the performance of a dynamic basket of European investment grade corporate Bonds, which are selected using a systematic selection method based on environmental, social and governance criteria (ESG) as well as carbon emission and energy transition criteria.
The carbon footprint of the portfolio is offset every quarter through the purchase of verified emission reduction certificates (VERs) from the Kasigau Corridor REDD+ project in Kenya, chosen by BNP Paribas for its environmental and social impact.
The selection of European investment grade corporate Bonds is made to ensure:
- Risk control:
- A long-only portfolio comprised of Bonds whose weight is between 0% and 1.5%, resulting on a minimum 67 Bonds;
- Diversification rule with a maximum exposure of 5% per issuer;
- An objective of controlled tracking error of around 0.5% to the European investment grande bond market;
- Promising yield: The Bonds eligible for inclusion in the portfolio are in the top 75% of the European Investment Grade Market in terms of yield-to-maturity
Why to invest?
- A diversified liquid portfolio with high ESG standards
- Tangible environmental and social impact
- An answer to energy transition and carbon footprint reduction concerns
- Benefits from proven track record of the equity-based solution developed with the same aproach
How Does it Work In A Nutshell?
- The fund provides exposure to BNP Paribas Bond Europe Climate Care Strategy which follows the below major steps in order to select the final portfolio and achieve its objectives
High Yield Europe Defensive “HYPE”
Credit spreads are not particularly low, while absolute yield is. This leads to a difficult choice to get yield. High yield is often ruled out, despite its effective returns. Find out more about our THEAM Quant – High Yield Europe Defensive.
The objective of the fund is to provide capital growth (i) by being dynamically exposed to a long position on European high yield credit and (ii) by implementing a systematic options strategy which aims at reducing risk by minimizing volatility and drawdown in the fund.
Long exposure in Europe Crossover Credit:
- Synthetic investment in the on-the-run series of Markit iTraxx Xover 5Y CDS Indices through BNP Paribas High Yield Europe 5Y Credit Index
- Equivalent to a sale of protection under a credit default swap on a basket of 75 liquid Crossover European names, with 5 year maturity
- Roll every 6 months from the existing to the new on-the-run series published by Markit
Volatility control mechanism:
- The volatility-controlled strategy has a dynamic exposure to BNP Paribas High Yield Europe 5Y Credit Index targeting to maintain the volatility below 9%
- Daily purchase of synthetic put options on the volatility-controlled strategy with a 1-year maturity for SCR recognition and a 95% strike to limit drawdowns