SEPTEMBER 2025
One of our key bond fund investments: Ninely One Global Total Return Credit Fund
Bond investing has long been a cornerstone of our multi-asset investment strategy. Historically, we have included bonds, or fixed interest, in our portfolios for their low correlation with traditional asset classes, favourable volatility characteristics, and consistent income generation.
In recent years, however, bonds have evolved from being a useful portfolio diversifier to becoming, again, a meaningful source of returns. In the aftermath of the financial crisis, yields from bonds were moribund reflecting the prevailing interest rate environment. Following the spike in inflation in 2022 and the subsequent rise in interest rates across developed economies, yields on both government and corporate bonds have increased significantly. This shift has reshaped the role bonds play in a diversified portfolio, creating opportunities for attractive returns.
One fund we particularly like in this space is the Ninety One Global Total Return Credit Fund. This is an unconstrained credit fund, giving the managers flexibility to invest across the entire fixed income spectrum. While it typically focuses on High Yield and Investment Grade credit in developed markets, its toolkit extends well beyond these areas. The fund sits within our specialist fixed income allocation. This sector offers credit exposure that carries more risk than government bonds, which are considered very low risk investments. To compensate investors for taking on this additional risk, credit issuers pay a premium coupon.
The fund is structured around these three investment buckets, designed to perform throughout market cycles. The experienced team combines a defensive core to protect the fund during periods of volatility with cyclical and specialist bonds to capture market rallies and yield enhancement. Crucially, the fund’s returns are primarily driven by credit selection, highlighting the team’s skill in picking the right bonds at the right time rather than relying on broad market movements.
A standout feature of the fund is the team’s flexibility to adjust asset allocation over time. The managers continually assess the economic and market environment to identify which areas of the credit market offer the most attractive value. This dynamic approach allows the fund to respond to changing conditions and capture opportunities as they arise.
This flexibility has resulted in a diverse and resilient returns profile, reinforcing the fund’s role as a core contributor to diversified returns across the market cycle. By allocating dynamically across the credit market, the fund can capture opportunities that may perform well whilst mitigating exposures to those that are underperforming. This diversification is key as it reduces reliance on any single part of the credit market, smoothing returns over time.
Its role as a diversifier was clearly demonstrated following the post-Liberation Day turmoil, when the fund outperformed the UK market index by 6%.
We favour this fund for its flexibility, ability to protect capital in down markets, and consistent performance through market cycles, all while maintaining low correlations to traditional fixed income and equities. For these reasons, it serves as one of our key bond fund investments.
This commentary was prepared by the CAM Research Team.