Global Multi-Sector Bond Strategy

Strategy summary

The Global Multi‑Sector Bond Strategy offers a go‑anywhere, flexible, diversified strategy that invests across all global fixed income sectors with no inherent structural bias. We believe that using the broadest opportunity set allows for multiple ways to seek higher yields and returns in a liquid, high‑quality portfolio while helping to avoid overconcentration in U.S. core bond allocations.
The strategy can invest across 15+ major fixed income sectors, 80+ countries, and 40+ currencies, allowing tactical allocation based on valuations, economic cycles, and market conditions to seek broad and diverse investment opportunities.
We rely on a consistent and repeatable investment process informed by proprietary research, deep credit and risk analysis, and collaboration with equity counterparts and sector traders. In a world where fixed income is increasingly complex, it is prudent to be backed by a vast team of fixed income analysts across the globe, covering every major global fixed income sector with dedicated local expertise in the U.S., Europe, and Asia.
The strategy employs various levers for alpha generation and risk management, including sector allocation, security selection, and geographic diversification, to diversify sources of both alpha and risk.

Features

An experienced portfolio management team

Portfolio Manager Ken Orchard has more than 20 years of investment experience and has been with T. Rowe Price since 2010. Portfolio Manager Vincent Chung joined the firm in 2019, supporting Mr. Orchard on the strategy, and has more than 10 years’ investment experience. To complement Mr. Orchard’s top‑down perspectives, a team of sector portfolio managers, who average more than 20 years of investment experience, contribute high‑conviction security selection and execution in coordination with their respective credit research and trading teams. Leveraging the integrated global research team, our experienced portfolio managers work together to construct an actively managed, diversified global bond portfolio seeking higher income and returns.

A disciplined and repeatable process

Mr. Orchard and the strategy’s portfolio management team administer an integrated investment process that draws on expertise from T. Rowe Price Associates, Inc.’s (TRPA) global fixed income division in combining both top‑down and bottom‑up inputs from our investment professionals.

We believe a holistic portfolio combining top‑down macro views with proprietary, fundamental bottom‑up research is the key driver of value‑added active management. Our investment process is broken down into four main steps described below:

Step 1. Understand Markets and Economics: Each month, TRPA’s fixed income division participates in a weeklong process to engage in robust discussions of the global economy, interest rates, currencies, and sector environment. The process involves all portfolio managers from across the fixed income division, TRPA’s economists, credit analysts, quantitative analysts, and specialized traders. The goal of this monthly process is to draw together resources in an efficient manner to provide portfolio managers with the optimal amount of relevant information to generate investment themes and support investment decisions. Using these insights, Mr. Orchard sets and updates credit risk, duration, and currency positioning targets.
Step 2. Sector and Security Selection: Informed by the information gathered in step 1, this step involves assembling a basket of investment options through recommendations and highlighted opportunities across return drivers, including interest rates, sectors, securities, and currencies.
Step 3. Portfolio Construction: The portfolio management team considers structural tilts such as identifying and overweighting efficient sectors. Then to build the portfolio holistically, we align top‑down and bottom‑up views to invest in highest conviction ideas while avoiding overconcentration. Finally, the portfolio management team determines positioning, sizing, and hedging in the context of the portfolio’s liquidity profile and potential event risks.
Step 4. Ongoing Monitoring/Risk Management: We conduct daily and weekly risk assessments to continuously calibrate our portfolios and rebalance if allocations drift from their intended targets. We maintain target allocations through daily cash flows as much as possible.

The first two steps typically take the form of a debate where macro themes are discussed (according to an agenda set by senior portfolio managers) and analysts can present investment ideas. Analysts are often challenged by portfolio managers at this stage of the investment process and must defend the level of conviction behind each investment opportunity.

The portfolio management team drives the final two steps, assessing each position not only on its own merit, but as part of the overall portfolio construction within a disciplined risk‑approach framework. For the Global Multi‑Sector Bond Strategy, the portfolio management team and the five sector portfolio managers debate and reach consensus on portfolio construction.

Global research capabilities

Detailed credit analysis is at the heart of our investment process, which focuses on identifying improving credits. Research conducted by our dedicated sovereign and corporate analysts incorporates fundamental, technical, and relative value analysis and emphasizes collaboration across TRPA’s global research platform—including our equity, quantitative, and responsible investing and governance teams. The Fixed Income credit research team spans three continents with analysts based in Baltimore, London, and Hong Kong, among other regional offices. To that end, we apply a proprietary internal credit rating process, which allows our analysts to identify the potential for upgrades or downgrades by public ratings agencies where we believe a company’s value often is not reflected. Bonds that are “mis‑rated” by the agencies can offer relative value opportunities. Therefore, we have developed a proprietary credit rating system that allows us to establish and justify an independent credit and investment view with the goal of identifying improving credits. Our analysts also assign an investment recommendation to every issuer. The investment recommendation, or “conviction score,” informs portfolio managers on what investment action the analyst recommends—whether to buy, sell, or hold the issuer’s securities. The score incorporates both fundamental and relative value considerations.

Analysts also consider the shape of the credit curve and carry and rolldown characteristics when making a specific security recommendation. For example, a specific issuer’s credit curve may be steep and offer more attractive relative value at the longer end of its curve. Overall portfolio duration is managed from the top down, giving analysts and sector portfolio managers the flexibility to find the best value.

Risk management

A controlled risk profile is paramount for the strategy as it seeks attractive income and returns. We take a multifaceted approach to risk management and examine risk exposures through multiple lenses: at the portfolio level, the position level, and the firm level on a daily basis. Risk levels are formally reviewed weekly by the strategy team, and TRPA’s Enterprise Risk Team and the Fixed Income Investment Risk team provide oversight through monthly review of operational, regulatory, and liquidity risk. The Fixed Income Steering Committee also provides additional oversight and evaluates each strategy’s risk budget and exposures and reviews reports that quantify how each portfolio would perform under various yield curve and spread scenarios.

Kenneth A. Orchard, CFA® Head of International Fixed Income

Kenneth Orchard is head of International Fixed Income. He is portfolio manager for the Global Multi-Sector Bond and Diversified Income Bond Strategies and co-portfolio manager for the International Bond and Global Aggregate Bond Strategies. Kenneth is a member of the Fixed Income Steering Committee and the European and UK Asset Allocation Committees. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

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