Update as at 15th April 2020
Maintaining flexibility in turbulent times
The UK has battened down the hatches and entered lockdown since our last update. Quarantine measures have been put in place across Europe, as countries use similar defensive steps to tackle the spread of COVID-19 and protect their most vulnerable citizens. The world’s attention is now firmly fixed on the constant barrage of news about the virus, as it continues to have an unprecedented impact on life as we know it. It is important, however, in these difficult times, to reflect on what we know for certain, which is that this will not go on forever.
Our team have prepared carefully for an event like this and while we are now working remotely, our management of the fund has continued seamlessly. Using our well-established investment strategy and processes, we have adapted swiftly to near-term fluctuations in the market and continue to search for attractive opportunities.
Markets remain volatile as investment sentiment ebbs and flows in response to the daily news flow and its impact on the corporate world, in the form of credit downgrades and dividend suspensions. This turbulence has highlighted the value of holding a globally diversified portfolio of high-quality bonds. We have maintained our cautious approach and have reduced holdings that no longer meet our criteria, whilst beginning to look for attractive long-term opportunities. Using our bottom-up stock-picking strategy, we concentrate on companies with strong balance sheets that can better withstand the near-term turmoil and we continue to avoid large exposure to any single issuer. This approach, combined with our strong liquidity position, means we have the flexibility to cope with dislocations in the market, enabling us to avoid the need for any potentially unhelpful liquidation of assets.
Governments and central banks continue to announce further stimulus packages and rate cuts as new data about the likely impact of COVID-19 is published. We remain confident in our strategy and continue to closely monitor the markets for developments. There are already glimmers of hope; new case numbers have begun to decline in some European countries and a number have started easing lockdown restrictions. The position remains uncertain, however, and in that context flexibility remains crucial.
Marlborough Global Bond team
Update as at 19th March 2020
Shelter from the storm
Investors are grappling with dramatic moves as COVID-19 creates a sense of panic and the world stares into the unknown. For us, as investment managers, it is important not to get caught up in mass hysteria. Our process has been unchanged since the launch of the fund in 1987 and we have seen many chaotic, market-moving global events such as Black Monday in 1987, the UK’s withdrawal from the European Exchange Rate Mechanism in 1992, the Russian Financial Crisis in 1998, the bursting of the dotcom bubble in 2000 and most recently the Global Financial Crisis in 2008.
A well-managed and diversified portfolio of bonds remains a relatively safe investment opportunity. Our focus has always been on the long term and with a global bond portfolio of around 500 holdings, we avoid large individual exposures. This, coupled with a significant cash buffer, allows us some near-term flexibility to avoid the indiscriminate liquidation of assets at distressed valuations. Faced with current uncertainty, our response is to remain steadfast to our tried and tested strategy and, while others may be forced to focus solely on the short-term market volatility, we are endeavouring to keep an eye on the future. Our cautious approach has always centred on sustainable, bottom-up stock selection and we are of the view that the current fluctuations will lead to long-term, attractive opportunities that we can take advantage of as the market readjusts to a new reality.
Monetary authorities around the globe are making full use of their policy toolkits, including many non-conventional measures now at their disposal. We have already seen rate cuts from those central banks that have had the room to do so, including the US Federal Reserve and the Bank of England. Policymakers are now pushing through unprecedented stimulus packages in an attempt to mitigate the ongoing effects of COVID-19 and the markets are judging these daily. Our intention is to remain calm and avoid knee-jerk reactions to unpredictable market movements. As we have done in the past, we will continue to monitor the markets with a level head and to act accordingly.
These are indeed extraordinary times, but, with the right strategy in place, we remain confident in our ability to take advantage of the inevitable market dislocations in the knowledge that there will be brighter days ahead.
Marlborough Global Bond team.
Capital is at risk. This is not advice. The value and income from investments can go down as well as up and are not guaranteed. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
Issued by Marlborough Fund Managers Ltd, authorised and regulated by the Financial Conduct Authority (reference number 141660). Registered office: Marlborough House, 59 Chorley New Road, Bolton, BL1 4QP. Registered in England No. 02061177.