290. Defensive plays: how to thrive in a market full of surprises

Dillon Lancaster, co-manager of the TwentyFour Dynamic Bond fund, talks us through the current push and pull factors in the bond market, focusing on the team's strategic moves in response to the central banks' aggressive rate hikes over the past 18 months. We discuss why the team has been favouring government and investment grade bonds, their views on the likelihood of a recession and use of European AT1s and European CLOs in the portfolio. We also discuss the likelihood of recession in 2024 and whether defaults are set to rise.

What’s covered in this episode: 

• The attraction of government bonds
• Concerns over fiscal deficits in the US
• Why the fund is moving to investment grade bonds
• Will we see a recession in 2024?
• Are defaults expected to increase next year?
• Will US student loan repayments impact the consumer
• Why a quarter of the fund is in US Treasuries 
• How the fund is using European AT1s
• The preference for European banks over US banks
• What is a CLO?
• The funds exposure to European CLOs
• The current yield on the TwentyFour Dynamic Bond fund

More about the fund:

TwentyFour Dynamic Bond has a very flexible approach in order to take advantage of changes in market conditions. It may invest across the whole range of fixed interest assets. The income produced is usually one of the highest in the sector, but will fluctuate as investments and market conditions change. This fund differs from most strategic bond funds due to a consistent weighting to asset-backed securities, an area in which the team specialises.

Additional resources: 

• What are AT1 bonds, and how do they work? 
• Everything you need to know about CLOs 

Learn more on fundcalibre.com

Please remember, we’ve been discussing individual companies to bring investing to life for you. It’s not a recommendation to buy or sell. The fund may or may not still hold these companies at the time of listening. Elite Ratings are based on FundCalibre’s research methodology and are the opinion of FundCalibre’s research team only.