A global focus aims to provide more investment opportunities and diversity when compared with managers that focus only on domestic fixed income markets. Credit markets may offer higher income and lower levels of correlation with equities and government bonds, which could improve the risk-return profile of a balanced investment portfolio.
Bentham manages the funds using a top-down approach for sector selection and a bottom-up approach for security selection. Drawing on a combination of both experience and strong relationships with specialist investment managers, Bentham seeks out and aims to identify global investment opportunities.
Key aspects to the Bentham approach are as follows:
A key concept in credit portfolio management is diversification. This is because defaults tend to be unexpected and occur in industry clusters. When defaults increase the lack of diversity will become a significant issue for funds holding concentrated positions in less liquid markets. We observe that in a global context, Australia and New Zealand are unique in tolerating concentrated credit portfolios despite our economies facing the same default risks as elsewhere.
Bid/offer spreads, resilience, size of a holding and depth of a market are reflected in the liquidity of debt. The more liquid that debt is the more attractive/marketable it is to investors. Desirable investments usually have good market depth and therefore good marketability. The characteristics of marketability include broad distribution by investor type, transparent pricing and external ratings.
Relative Value Approach
Investments are made according factors such as risk, security, structure and liquidity. The ability to invest in global markets and in a variety of currencies helps to ensure the best value investments are made.
Marked to Market
Marked to market valuations are considered best practice for open-ended credit funds. Bentham believes this is a core principle required to ensure fair outcomes for both entering and exiting investors, and those investors who remain holders in the Fund at any point in time. Accordingly, Bentham’s Funds are priced daily and Bentham’s Funds’ assets are marked to market on a daily basis.