Since the addition of the ‘unconstrained category,’ Zenith has added six funds to its approved list for the global fixed interest sector well as re-classifying another three funds.
Speaking to InvestorDaily, Zenith investment analyst Steven Tang said the unconstrained category covers those funds that are not benchmark relative or have less restrictive benchmarks.
Mr Tang said these funds generally have “more latitude to invest across sectors and duration”.
There are two classifications within the category, absolute return which aims to provide positive annual returns and total return which aim to provide positive returns over the market cycle but not necessarily on an annual basis.
Mr Tang said traditional benchmark relative strategies have inherent characteristics or “potential flaws” such as the fact they are more heavily weighted towards larger issuers who could be of low quality.
“The other benefit is obviously duration - duration of the benchmark itself has extended over the last few years and that’s obviously in a low yield environment,” he said.
He explained that investors chasing yield in benchmark relative strategies with longer durations may miss out on higher returns when rates begin to rise from the current low yield environment.
