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Fixed Income
5 reasons to invest in the Euro Aggregate strategy
Peter Becker
Fixed Income Investment Director
KEY TAKEAWAYS
  • An allocation to euro fixed income could provide capital preservation in times of uncertainty and offer diversification fromr risk assets.
  • The Capital Group Euro Aggregate strategy focuses on producing consistent long-term results through its conservative, diversified, and disciplined investment process.
  • Duration flexibility and active yield curve management help the portfolio to adapt to diverse market environments.

1. Provides diversification and the potential for capital preservation


For many euro-based investors, euro-denominated fixed income is a core asset class which plays an important role in a broad diversified portfolio.


Building a balanced, diversified and risk-prudent portfolio is important for many investors, particularly in an environment with increased financial market uncertainty and heightened volatility across a range of asset classes.


An allocation to euro fixed income can be the anchor of a durable and resilient euro-based portfolio. Through its focus on higher quality bonds (minimum 80% invested in investment grade bonds), Capital Group Euro Aggregate strategy could provide capital preservation relative to the equity market in times of market stress and offer diversification from risk assets.


The strategy seeks to provide high total return and capital preservation by investing in global fixed income securities. It adopts a conservative approach based on fundamental research with flexibility to capture attractive return opportunities sensibly without taking unnecessary risks.


It has protected on the downside during past global equity market downturns1,2. For example, during the global financial crisis, the MSCI World index fell by 53.4% in euro terms between 15 June 2007 and 9 March 2009 whereas the Capital Group Euro Aggregate strategy delivered a positive return of 10.2%2.


Capital Group’s fundamental research is aimed at identifying broad market trends, sectoral relative value, and credit-driven opportunities. In-house research is used to find securities with valuations that compensate for the various risks (including repayment/credit risk, liquidity risk and market risk) entailed in holding them, and then construct portfolios within a risk-management framework that seeks to diversify sources of risk and return at the overall portfolio level.


2. Draws on a large and diverse core market with opportunities both inside and outside the index


The strategy offers access to a large government, corporate and securitised bond market with core, semi-core and peripheral markets.


  • The large European investment grade bond market not only gives access to a broad investible universe, both in size and in terms of geographical diversity, but also provides a divergence of yields and risks.
  • The portfolio managers aim to enhance portfolio returns and diversification by identifying opportunistic investment ideas outside the index universe. However, market exposures are still closely related to the euro aggregate bond market and are sensibly implemented.

Duration flexibility and active yield curve management help the managers to adapt the portfolio to differing interest rate environments.


3. Capital Group’s investment analysts draw on multiple inputs


European economies and markets are influenced by the global economy. Our global reach and experienced investment team ensure we have the required research capabilities and knowledge to keep track of various acroeconomic developments that could influence and impact European bond markets.


 


Past results are not a guarantee of future results.


1. Based on six equity market downturns between 5 June 2007 and 23 March 2020.


2. Comparing returns in EUR terms for a representative account of the Capital Group Euro Aggregate strategy, gross of management fees and expenses to MSCI World Index with net dividends reinvested. Sources: MSCI, Morningstar, Capital Group


 


Risk factors you should consider before investing:

  • This material is not intended to provide investment advice or be considered a personal recommendation.
  • The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
  • Past results are not a guide to future results.
  • If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
  • Depending on the strategy, risks may be associated with investing in fixed income, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.


Peter Becker is a Fixed Income investment director at Capital Group. He has 25 years of industry experience and has been with Capital Group for three years. He holds a master's degree from The Ingolstadt School of Management. He also holds the Chartered Financial Analyst® designation. Peter is based in London.


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Past results are not a guarantee of future results. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.