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What is driving the positive sentiment towards alternative fixed income strategies?

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4 minutes, 7 seconds to watch by  Polina Kurdyavko, CFA® Mar 25, 2025

Since the global financial crisis, the landscape for absolute return strategies has undergone significant changes, influencing investor attitudes. Polina Kurdyavko, Head of BlueBay Emerging Markets, discusses the resurgence of these strategies and the strategic approaches used to navigate market volatility.

Watch time: 4 minutes, 7 seconds

View transcript

Since the global financial crisis, investors have had a more cautious approach to absolute return funds. This is not surprising given the change in regulations, large drawdown that we experienced during the 2008 financial crisis, and the need for more transparency. We feel that this is changing, and absolute return funds are back in vogue. When we think about investing in alternative funds, it's important to differentiate what type of exposure an investor would like to have. We can see on one hand a long bias exposure, which has a longer time horizon, and generates consistent stream of returns from the underappreciation of the asset or excessive liquidity premiums.

Alternatively, we see strategies that generate return from volatility. At RBC BlueBay, we do both. Often we hear from our clients that they like the absolute return strategies, but they're not too positive on credit or emerging markets at this point in time. As an investor, if you decided to choose strategies that generate performance from volatility in this asset class, you don't have to have a positive beta view on the asset class. You have to have a positive view on the volatility in the asset class and the opportunity set. Whether it is COVID pandemic, Russia-Ukraine war, geopolitical escalations in the Middle East, we can generate positive return from these events.

Therefore, at BlueBay, we cover the broad range of alternative strategies, both focused on directional strategies, where we're generating double-digit return based on the illiquidity premium or distressed nature of the investment, or non-directional strategies that take advantage of volatility in the asset class, and generate the same double-digit return with a lower volatility than beta of the asset class through the times of dislocations in the asset class, whether they're driven by macro events or bottom-up events.

What is key to consistently delivering performance and absolute return strategies? At RBC BlueBay, we feel that the success lies in deep research, experienced resources, and rigorous risk management with a team of over 100 individuals that collectively spend majority of their time on the ground in emerging and developed markets, doing their bottom-up due diligence, combined with state-of-the-art proprietary quantitative tools that allow us to measure the risk that we're taking, delivers an outcome where we consistently perform and deliver double-digit returns with a lower volatility than that of the market and consistent sharp ratios. We feel that we're a safe partner for an investor who wants to consider an absolute return strategy.

Key takeaways:

  • The resurgence of absolute return funds as investor confidence grows, is influenced by improved regulations and a demand for transparency.

  • An explanation of the differentiation between long bias strategies versus strategies that leverage market volatility.

  • The importance of deep research, experienced resources, and rigorous risk management in consistently delivering strong performance with lower market volatility.

Disclosure
This material is provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC GAM or its affiliated entities listed herein. This material does not constitute an offer or a solicitation to buy or to sell any security, product or service in any jurisdiction; nor is it intended to provide investment, financial, legal, accounting, tax, or other advice and such information should not be relied or acted upon for providing such advice. This material is not available for distribution to investors in jurisdictions where such distribution would be prohibited.

RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc. (RBC GAM Inc.), RBC Global Asset Management (U.S.) Inc. (RBC GAM-US), RBC Global Asset Management (UK) Limited (RBC GAM-UK), RBC Global Asset Management (Asia) Limited (RBC GAM-Asia) and RBC Indigo Asset Management Inc. (RBC Indigo), which are separate, but affiliated subsidiaries of RBC.

In Canada, this material is provided by RBC GAM Inc. (including PH&N Institutional) and/or RBC Indigo, each of which is regulated by each provincial and territorial securities commission with which it is registered. In the United States, this material is provided by RBC GAM-US, a federally registered investment adviser. In Europe this material is provided by RBC GAM-UK, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this material is provided by RBC GAM-Asia, which is registered with the Securities and Futures Commission (SFC) in Hong Kong.

Additional information about RBC GAM may be found at www.rbcgam.com.

This material has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate and permissible, be distributed by the above-listed entities in their respective jurisdictions.

Any investment and economic outlook information contained in this material has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions in such information.

Opinions contained herein reflect the judgment and thought leadership of RBC GAM and are subject to change at any time. Such opinions are for informational purposes only and are not intended to be investment or financial advice and should not be relied or acted upon for providing such advice. RBC GAM does not undertake any obligation or responsibility to update such opinions.

RBC GAM reserves the right at any time and without notice to change, amend or cease publication of this information.

Past performance is not indicative of future results. With all investments there is a risk of loss of all or a portion of the amount invested. Where return estimates are shown, these are provided for illustrative purposes only and should not be construed as a prediction of returns; actual returns may be higher or lower than those shown and may vary substantially, especially over shorter time periods. It is not possible to invest directly in an index.

Some of the statements contained in this material may be considered forward-looking statements which provide current expectations or forecasts of future results or events. Forward-looking statements are not guarantees of future performance or events and involve risks and uncertainties. Do not place undue reliance on these statements because actual results or events may differ materially from those described in such forward-looking statements as a result of various factors. Before making any investment decisions, we encourage you to consider all relevant factors carefully.

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© RBC Global Asset Management Inc., 2025
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