An international absolute return manager has noticed a shift in the attitude of investors towards fixed income in the current economic climate, with the inclusion of the asset class in portfolios seen as a source of active return rather than a pure defensive component.
Kapstream noted the change in portfolio construction approach was the result of rising interest rates, equity market volatility and stretched market valuations.
“We’re seeing a clear evolution in how investors think about fixed income. It’s no longer just about balancing equity risk, but generating reliable returns in its own right,” Kapstream managing director and portfolio manager Dylan Bourke said.
“As macro uncertainty and equity market volatility persist, investors are increasingly focused on portfolio resilience, not just returns, and the ‘sleep at night’ factor is an increasingly important consideration in capital allocation.”
The manager indicated disciplined risk selection has gained increased importance given the challenge credit markets face in an environment of higher interest rates, softer demand and more divergence in performance from a wider number of suppliers contributing to the asset class.
“In this kind of market, broad exposure becomes less effective, [rather] it’s about being disciplined, focusing on quality and actively managing risk. Just as importantly, having a global view allows investors to access a wider opportunity set and avoid being overly exposed to any one market,” Bourke pointed out.
In other news relating to the manager, it recently launched the Kapstream Investment Trust trading on the Australian Securities Exchange under the KIT ticker.
Further, both KIT and the Kapstream Private Investment Fund have passed $200 million in funds under management, with both receiving a ratings upgrade to ‘recommended’ from research house Zenith Investment Partners for a disciplined investing approach.
“We’re thrilled at this recognition by Zenith. In the current environment, where investors are focused on managing risk and protecting capital, that kind of independent validation gives added confidence that the strategy is doing what it’s designed to do,” Kapstream managing director and portfolio manager Daniel Siluk said.