Spotlight on Matt Day, Senior Portfolio Manager, Global Fixed Income & Currency Team, Mondrian Investment Partners
Global Thought Leader Spotlight
Matt Day, Senior Portfolio Manager, Global Fixed Income & Currency Team, Mondrian Investment Partners
I am a long-standing member of the Global Fixed Income and Currency Team at Mondrian Investment Partners, having joined the Team in 2007. I started my career in 2002 in actuarial consulting and qualified as an actuary in 2006. At Mondrian I have a quantitative research focus, particularly the analysis of inflation in countries around the globe.
The Backdrop for Global Fixed Income Investing
Across global fixed income portfolios, we are seeing strong relative value in developed bond markets compared to the past. We use internally derived real yields as the metrics of value for countries’ bond market valuations, and currently observe a significant divergence in real yields.
In addition, we are also observing strong currency signals based on our value metrics. Several currencies are appearing extremely undervalued relative to the US dollar, and we are positioned accordingly. We see particularly good value in currencies such as the Japanese yen and the Norwegian krone.
There are currently fewer opportunities in credit in our view. Credit is generally overvalued, particularly US dollar denominated credit, but we do see pockets of value elsewhere.
These broad valuation signals are set against an interesting global macroeconomic backdrop.
Particularly, we observe three key developments:
Whilst goods inflation has recently been low, services inflation has generally remained elevated in developed countries. Several components of services inflation look likely to fall significantly, which should see a continuation of the disinflation process.
Unemployment is generally rising globally.
Recessionary risks continue to persist and the US yield curve remains inverted. The inversion of the yield curve has predated all of the last eight US recessions, with no false positives over this period.
Implications for Institutional Investors
High quality fixed income portfolios are an attractive proposition against this backdrop in our view. Many components of credit markets are unattractive in our opinion; most parts of the credit market are overvalued based on our valuation metrics. Lower quality fixed income sectors, as we would expect, perform poorly at times of financial market stress and economic weakness, further bolstering the case for high quality global fixed income portfolios.
In addition, we believe Mondrian’s Global Bond Strategies are attractive for the following reasons:
Opportunities within global bonds to add performance are ample, and, as mentioned, in the current environment our value signals are identifying opportunities that are more attractive than we have seen for some time.
Whilst Australia has a reasonable real yield, the highest real yields can be found globally in Mexico, New Zealand, the US and the UK.
Our investment approach has delivered strong performance at times of financial market stress. For example, our GFI and Global Aggregate Strategies outperformed in Q1 2020.
We have a strong pedigree of global fixed income investing. We have managed global fixed income portfolios for over three decades and have delivered strong long-term results.
Matt will be presenting at Global Investment Institute’s upcoming Fixed Income & Alternatives Investment Forum, taking place on Thursday, 12 September 2024 at the Grand Hyatt Melbourne, Victoria.
To register your interest in attending, click here or for more information email zlatan@globalii.com.au.
Matt Day, Senior Portfolio Manager, Global Fixed Income & Currency Team, Mondrian Investment Partners
Matt joined Mondrian’s Global Fixed Income and Currency team in 2007. He has a quantitative research focus and is responsible for the continuing development of the company’s proprietary inflation and mortgage-backed securities models.
Previously, he worked in actuarial consulting, specializing in the development of stochastic asset and liability models for UK pension schemes at Buck Consultants.
He holds a BSc in Economics with a focus on Actuarial Studies from the University of Southampton and is a Fellow of the Institute of Actuaries.
If you have enjoyed reading this article, please subscribe to GII Insights, delivered monthly, direct to your inbox and it is FREE!
Disclaimer
The views expressed in this publication are solely those of the individual and do not reflect those of their employer organisation. These views should not be relied on as research or investment advice regarding any stock and are subject to change. There is no guarantee that any forecasts made will come to pass. Forecasts are subject to numerous assumptions, risks, and uncertainties, which change over time, and the individual undertakes no duty to update any such forecasts. International investing may involve risk of capital loss from unfavourable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations.
All information contained within this publication is general advice only, as the knowledge levels and needs of all individual and corporate investors vary greatly this publication should not be used solely as a decision-making tool, further opinions and information should be sought before making an investment decision. It is the recommendation of Global Investment Institute (GII) that you seek the opinions of a fee-for-service, independent investment adviser before making any investment decision.
The authors, directors or guest writers may have a financial interest as investors, trustees or directors in investments discussed or recommended in this document. It has been assessed by the editors that these financial interests have not had an impact on the material contained here within.
All material appearing in GII’s Global Investment Insights is copyright, reproduction in whole or part is not permitted without written permission from the Publisher, Global Investment Institute.