Muzinich short duration crossover strategy invests predominantly in corporate bonds with ratings ranging from single A to single B, while maintaining an average portfolio duration of less than 2 years.
The strategy aims to generate strong risk-adjusted returns and achieve capital preservation through prudent asset allocation between short duration investment grade bonds, which tends to be more correlated to sovereign debt, and high yield rated bonds, which tend to be more correlated to equity markets. Due to the prevailing environment of flat credit and rates curves, the strategy can capture a large proportion of credit spreads with limited duration risk.
The strategy also actively seeks to:
- identify callable high coupon bonds, which tend to be low beta and can offer better return potential than their yield-to-worst would suggest
- capitalise on cross currency opportunities resulting from diverging economic cycles and central bank policies