Speaking to InvestorDaily, GSAM managing director Philip Moffitt said the fund would employ an absolute return approach, unconstrained by its benchmark.
Mr Moffitt said the strategy of the fund has been designed to protect investor capital during periods of rising interest rates while allowing the investment managers to take advantage of opportunities in the market in the right environment.
“The approach is designed to produce similar returns to a normal fixed income investment in a good or benign environment and provide protection in a difficult environment,” he said.
Mr Moffitt said GSAM expected interest rates to rise globally, with central banks expected to end their easing policies over the next 12 to 18 months.
Capital losses in standard fixed income portfolios could be very high, particularly in terms of duration risk – resulting in a high probability of negative returns.
Mr Moffitt said the fund’s dynamic approach will “enable it to adapt to rapidly changing market conditions and proactively manage risks, including duration risk”.
“We think that the current situation in global fixed income markets is the sort of period of time in which this style of approach should make much more sense,” he said.
GSAM believes the addition of the fund to the existing portfolio will enhance the total return performance through a dynamic approach to the complex nature of current fixed interest markets, he added.
