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By Trilogy Funds Management
Is inflation poised to break out, or will the spread of the delta coronavirus variant weigh so heavily on global growth as to counteract fears of economic overheating?
For fund managers, predicting movements in price indices and the many other factors that impact on interest rates has never been more challenging than it is today.
Only by modelling multiple scenarios can they ensure they are prepared for any eventuality, and that’s only to the degree that a scenario can be imagined and engineered says Henry Elgood, Head of Investments for Fixed Income at Trilogy Funds.
“Right now, we are at a historically low base in terms of inflation and interest rates and the Reserve Bank of Australia (RBA) has indicated that they expect it will be a number of years before we see rates starting to rise,’’ says Elgood.
“But it’s worth asking the question: what if interest rates do rise sooner and the expectations of interest rate increase are brought forward? Where might they move to and, just as important, how quickly?
“That’s something we’re really conscious of at Trilogy Funds and we’re in constant dialogue with other market participants whilst also making our own re-evaluations and assessments at regular intervals as to what the future may look like.’’
Trilogy Funds’ proactive management and strategic allocation of assets in its Trilogy Enhanced Income Fund has aided the generation of returns across different cycles and through periods of shifting market sentiment. While market yields have yoyoed in 2021, Elgood says the fixed income space has provided compelling investment opportunities.
“Over the past quarter, we’ve seen opportunities across the government debt issuance space, both at the federal level but also at a state level in terms of being able to maximise returns for investors,’’ says Elgood.
“While doing that we also want to maintain exposure to companies that have strong balance sheets and strong capital management positions with good tailwinds in the economy.’’