What Differentiates Us
What makes our Global Debt Team unique in managing Oppenheimer International Bond Fund
is that we operate within the confines of an overall risk budget for our portfolio—and we don’t look at risk as something symmetrical.
We strongly believe that in international fixed income investing, the benchmark we assign to our portfolio should represent one of the highest risk points for our investors. We try to construct portfolios that have asymmetrical risk (i.e., portfolios that are designed to have higher upside potential when markets are doing well and lower downside potential when the market environment is negative).
Ultimately, our portfolio revolves around—and is driven by—our investment process. In this process, we try to answer three questions:
What risk regime is the world in? High, moderate or low?
- What is the nature of economic growth? (Is it broad-based, coming from many countries—or narrow, coming from just a few? Is it driven by particular sectors?)
- What is the impact of countries’ economic policies on the market?
Once we’ve answered those questions, we take a look at risk and reward from an absolute and relative perspective (i.e., versus the benchmark):
- When market conditions are benign or favorable, we seek to maintain low tracking error and high volatility by aiming to remain within close proximity to the benchmark in order to capture the upside.
- When market conditions deteriorate or are unstable, we seek to maintain high tracking error and low volatility by taking significant out-of-benchmark positions in an effort to reduce losses.
We believe this approach has enabled us to generate attractive risk-adjusted returns over time.
The Importance of Our International Approach
Investing in international markets can bring additional volatility through exposure to different interest rate regimes, foreign exchange, and credit environments. However, we believe our approach to investing in international fixed income can help dampen the peaks and valleys of returns that come from international investing. In so doing, we seek to provide a smoother ride for investors and allow them to stay invested in international markets across a full cycle, and for a longer period of time.
Our Sustainable Investment Process
We believe that sustainable investment performance comes from a clear philosophy and a definable process.
Our process comes from focusing on the medium-term economic analysis, looking at our base case for market pricing, and trying to construct a portfolio in accordance with our risk budget and allocations that we’ve mentioned earlier.
We’re not in the business of forecasting returns, which we think is the reason why many investment processes fall apart. Second, we do not focus on timing the market. Rather, we believe in a prudent and diversified allocation of risks—and in taking the long view.
For example, our approach to investing in Europe evolved over a multi-year period and allowed us not to get caught up in many of the short-term events that have happened along the way.
We take a discretionary macro approach to investing in international fixed income—one that considers the broad economic picture on a global and country-by-country basis, as well as economic linkages between different countries.
Finally, we believe that the creation of a self-sufficient team—one that has all the necessary research and investment resources contained within it—is important for sustainable outcomes.
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