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Unconstrained Bond Funds and Multi-Sector Bond Funds 无约束债券基金

Fixed Income YTW by Sector

*Data Source: Barclays Global Family of Indices, May 2013

Unconstrained Bond Funds

Also called “go-anywhere” bond funds, unconstrained bond funds were introduced several years ago, when many U.S. fixed income managers perceived that investment-grade bonds could not go anywhere; rather, they were looking to invest flexibly over full market cycle across global multiple sectors, without being tethered to benchmark-specific guidelines.

By constructing an unconstrained portfolio, investment managers will have the potential to capitalize their “best idea,” views on anticipated changes in global market environment, and achieve absolute positive returns and lower risk exposure. In this sense, most unconstrained bond funds have an absolute-return orientation; they fall into the multi-sector income classification.

Unconstrained bond funds employ an active risk budgeting and dynamic risk allocation process; therefore, the risk profile of these funds may vary significantly over time based upon market conditions.

Multi-Sector Bond Funds 

Similar to unconstrained bond funds, multi-sector bond funds tap into a much broader opportunity set, seek income strategically by diversifying assets among different sectors of the bond market as well. These bond portfolios typically hold 35% to 65% of “speculative” issues where investment managers believe there is value.

The investment process follows a top-down approach:

  1. Macroeconomic Assessment
  2. Sector View
  3. Model Portfolio Design
  4. Security Selection
  5. Portfolio Construction

The process of multi-sector bond funds typically starts with developing a three-to-five-year outlook, for the global macro environment, technical market conditions, sector fundamentals, interest rates, in order to set parameters such as duration, reference yield curve positioning, sector weightings, credit quality breakdown, etc.

The key difference of unconstrained bond funds and multi-sector bond funds is that the portfolio managers of the latter are benchmark-aware.

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