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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OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value.
Fixed income investing entails credit and interest rate risks. Interest rate risk is the risk that rising interest rates or an expectation of rising interest rates in the near future, will cause the values of the Fund's investments to decline. Risks associated with rising interest rates are heightened given that rates in the U.S. are at or near historic lows. When interest rates rise, bond prices generally fall, and the Fund’s share prices can fall. Below-investment-grade (“high yield” or “junk”) bonds are more at risk of default and are subject to liquidity risk. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Emerging and developing market investments may be especially volatile. Eurozone investments may be subject to volatility and liquidity issues. Derivative instruments entail higher volatility and risk of loss compared to traditional stock or bond investments. Currency derivative investments may be volatile and involve significant risks. Small and mid-sized company stock is typically more volatile than that of larger company stock. It may take a substantial period of time to realize a gain on an investment in a small-sized or mid-sized company, if any gain is realized at all. The Fund is classified as a “non-diversified” fund and may invest a greater portion of its assets in the securities of a single issuer. Regulation S securities are privately offered securities, may be illiquid, and involve a high degree of risk which may result in substantial losses to the Fund. The Fund may also invest through a wholly-owned Cayman Islands subsidiary, which involves the risk that changes to the laws of the Cayman Islands could negatively affect the Fund.
The mention of specific regions does not constitute a recommendation on behalf of the Fund or OppenheimerFunds, Inc.
These views represent the opinions of the portfolio manager at OppenheimerFunds, Inc.,and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.