II on AXA IM Short Duration Sterling
U.K.-based International Investment writes "£47bn money market fund sector 'at risk' from negative rates, warns AXA IM." The article tells us, "The [money market fund] sector saw outflows of £1.7bn across the summer amid talk from the Bank of England that they were 'actively considering' introducing negative rates to help support the UK's flagging economy. Amid this backdrop, [Nicolas] Trindade, manager of the AXA Sterling Credit Short Duration Bond fund, believes it may be time for investors to consider other options." He comments, "We have seen interest rates and government yields plummeting this year, and that has led to ever lower money market rates.... There is a real risk the UK goes further and does opt to introduce negative rates, and for money market funds that would be a clear negative. All yields have fallen, but short duration bonds are still attractive, particularly for cash investors who are looking for products exhibiting lower volatility and drawdowns, and can commit to holding money in these bonds for a slightly longer time period." The piece explains, "`Trindade's AXA Sterling Credit Short Duration Bond fund yields around 1.1% currently, while his global Short Duration fund has a yield around 2.0%. Trindade added that by using different types of credit within the funds, the strategies can exploit opportunities across the credit spectrum to maximise yield." Trindade adds, "We've more than doubled our exposure since February, taking it to 40% now in the global fund, as we think we do get a return to a more normalised environment globally next year. Emerging market debt in particular will benefit from that, and from continued dollar weakness and low US treasury yields which we also expect."
