Fixed Income

Setting a benchmark can help individual investors understand the specific types of investments a strategy will make and provide a means of measuring its performance versus the wider market.

While benchmarks can provide a good indicator of the sectors, regions, or credit ratings included in the portfolio, an active approach doesn't simply replicate the benchmark in the portfolio. Instead, it uses the managers' knowledge and skill to build a selective portfolio of attractive opportunities within the benchmark, with the aim of adding value on top of the benchmark’s performance – referred to as an 'active return'.

Our strategies aim to outperform their benchmarks within a 'tracking error budget'. This means the level of active return we aim for is relative to a target level of active risk.

For strategies which are not measured against a benchmarks the focus is on delivering potentially attractive risk-adjusted returns by using greater flexibility to navigate market movements without reference to an index. 

Why investment grade credit?
Investment grade credit lets you invest in the debt of companies that are considered by external rating agencies as relatively less likely to default on their loans. Also, they tend to offer higher rates of interest than government bonds. 

Our strategy
We combine deep, local market expertise with top-down, macroeconomic research to create a robust, repeatable investment process that's been tested throughout the credit cycle. Our portfolio managers have access to all this research, and the expertise of our trading and engineering teams, at all times. 

Investment grade credit lets you invest in the debt of companies that are considered by external rating agencies as relatively less likely to default on their loans. Also, they tend to offer higher rates of interest than government bonds. 

Our strategy
We combine deep, local market expertise with top-down, macroeconomic research to create a robust, repeatable investment process that's been tested throughout the credit cycle. Our portfolio managers have access to all this research, and the expertise of our trading and engineering teams, at all times. 

Why Inflation-linked bonds? 
Over time, rising prices can erode the value of savings and investments. Inflation-linked bonds are fixed income securities designed to limit the impact of inflation on investors’ capital by linking the bond's principal and interest payments to a measure of inflation.

Our strategy

• A global team: we have a dedicated, highly experienced team managing UK, Euro, and Global inflation-linked funds closely supported by our fixed income teams. 
• A suite of solutions: our range of strategies include single market, global, and customised inflation-linked bonds. 
• Access to market insights and liquidity: our significant size – over €14bn in inflation-linked assets under management globally²   – provides us with access to liquidity, along with excellent market insights.

The likelihood of a government defaulting on its loans, at least in developed markets, is relatively low. As a result, lending money to stable governments through buying government bonds tends to be viewed as low risk. However, bonds with a longer maturity can still be sensitive to changes in interest rates. 

Why government bonds?
More conservative investors, like those approaching retirement, may prefer investments like government bonds. But they're not just for the risk-averse. These types of assets can help to balance higher risks from growth-oriented areas of a broader portfolio. Not all government bonds are low risk, low return – bonds issued by developing market governments may present a greater degree of credit risk, but could offer more attractive yields. 

Our strategy
We seek highly rated bonds with the potential to add valuable portfolio diversification. We actively manage the asset allocation according to the investment teams' judgement based on our strong research capabilities, with the aim of generating repeatable performance over the economic cycle. 

Why aggregates?
An actively managed aggregate strategy offers the potential to access opportunities across the investment grade universe. This provides the flexibility to capture a diverse range of potential sources of return, including by country, sector, and duration. 

Our strategy
We have a diversified and active approach to capturing opportunities in global fixed income, with the aim of outperforming an aggregate benchmark. The strategy is managed by a dedicated team with over 25 years experience in aggregate investing, who are supported by specialised, local credit teams. 

Why money market funds?
Money market funds have shorter terms (usually three months) until maturity. They're generally considered lower risk than traditional bonds and offer slightly higher rates of return than bank deposits. 

Our strategy
Increased liquidity in portfolios can help to ride out economic uncertainties. We've run cash portfolios for 25+ years1 , with rigorous liquidity management as a key priority. And we ensure diversity of issuers, sectors, countries, and maturities. 

Why short duration bonds? 
Traditionally, savers tended to look at two areas for low risk sources of income: interest rates on cash deposits in the bank, or bonds issued by the most credit-worthy governments. Today, neither provides much in terms of income.  

Short duration strategies are an attractive alternative, as they offer a potential route to cash-plus returns for a limited increase risk. 

Our strategy
We generally invest in bonds with maturities of five years or less and seek to capture high current income with low overall volatility. 

Why sustainable investing? 
At AXA IM, we believe investing responsibly goes hand-in-hand with our fiduciary duty to clients. We strive to safeguard the long-term interests of our clients by guiding companies towards more responsible behaviour and investing in those that meet the conditions for sustainable growth.

We believe a focus on sustainable investing helps us make better investment decisions and can be a means by which we can help accelerate the transition to a more sustainable world. Companies are having to adapt to their customers’ higher expectations around sustainable practices, which is backed by governmental and regulatory support to incorporate sustainability measures into company information. In addition, industry research and analysis are increasingly suggesting that incorporating ESG factors into investment processes can identify risks while potentially generating excess returns.

Our strategy 
Our Sustainable strategies embed sustainability factors into portfolio construction and use responsible investing analysis to refine and enhance the asset class universe. Strategies might follow a best-in-class policy which removes low-ESG-scoring companies, or adjust portfolios to target attainment of a specific ESG objectives such as a carbon footprint reduction.

These strategies also target United Nations sustainable development goals (SDGs) as part of their investment approach. Traditionally pursued via private equity, investors are increasingly implementing impact strategies via listed assets - referred to as Listed Impact.

Why impact investing? 
For a growing number of investors, financial returns are no longer enough. Today, investors are looking for more from their investments, namely companies providing innovative products and services which are directly positively contributing to the environment or society. 

Our strategy 
Our green bonds strategy aims to deliver investment returns with low volatility, while supporting the transition to a low-carbon economy. AXA IM has developed a proprietary green bond assessment framework. We built on this to create new frameworks for social and sustainability bonds. These are very similar in terms of structure, but some aspects differ due to the specificities of social and sustainability bonds. This approach is stringent, but it is also continuously evolving and aims to fulfil three main objectives:  

• Driving investments towards authentic and impactful green assets and social projects  
• Raising the integrity and transparency standards of the Green, Social and Sustainability bonds (“GSSB”) market  
• Ensuring that GSSB issuers are committed to fight climate change and to address sustainability challenges, and that this commitment is reflected in business practices and operations  

Selectivity is key in ensuring that only the most relevant and impactful green and social projects receive the necessary financing across four key areas: smart energy, green buildings, low carbon transportation and sustainable ecosystems. 

Why buy & maintain?
Buy and Maintain strategies offer a diversified, high quality and cost-effective access to the investment grade credit market and unlike a passive bond approach, these strategies are not tied to a benchmark.  This provides the flexibility to build a highly diversified portfolio that is designed to provide downside risk mitigation throughout the market cycle while still aiming to capture credit returns through relative value opportunities.

Our Buy and Maintain credit strategy combines the best of both worlds – the skill and added-value of active credit selection and monitoring, and the low cost of passive management.

Our strategy
Our fundamental investment approach is based on deep credit analysis and a focus on long-term trends. We aim to select high quality bonds which can be held to maturity. While we're always ready to trade in order to preserve value when faced with severe credit concerns, we aim to avoid unnecessary turnover and limit transaction costs to minimise eroding long-term performance.

There is a natural alignment between the time period over which climate risks and opportunities will materialise and the timeframe over which these strategies invest. For this reason, climate change is a key consideration with our Buy and Maintain strategies and it is fully integrated at each stage of the investment process.

In the late 2000s, Liability Driven Investment (LDI) mandates became a popular solution for institutional investors. LDI, at its most simple level, is about hedging assets and liabilities, and controlling the volatility of the portfolio on a day to day basis.

More recently, Cashflow Driven Investment (CDI) mandates have risen to prominence as a complement to LDI solutions by meeting institutions’ cashflow requirements. CDI is a more forward-looking and long-term approach that seeks to help clients increase their ability to meet their future cashflow requirements and funding objectives.

Why solutions?
Effectively managing cashflow challenges amid ever-decreasing liquidity in credit markets and rising transaction costs is becoming increasingly vital for many institutional investors, leading them to explore the potential benefits of adopting CDI solutions.

A successful CDI strategy is one that aims to reliably generate predictable cashflows through selecting assets like high quality corporate bonds to provide stable, contractual income in-line with the expected cashflow requirements.

Our strategy
Our solutions team works in partnership with our clients to provide strategic advice, portfolio management expertise and cost-effective implementation. At the core of our cashflow driven investing solutions is our long-term Buy and Maintain credit approach, designed to increase the predictability of client cashflows.