A day in the life of a fixed income fund manager

Maximising yield while minimising risk calls for a blend of research and experience while always keeping an eye on markets. It's a combination that shapes each working day for Scott Rundell, Chief Investment Officer of fixed income fund manager Mutual Limited.

I'm usually in the office by 6.30am. It's an early start, but a great opportunity to check what's happening with interest rates globally, through the actions of, say, the US Federal Reserve or the European Central Bank.

Economic developments in Australia and overseas, particularly around interest rates and inflation, influence the performance and risks of fixed income securities. So, this macroeconomic research really sets the scene for each day's investment analysis.

I use this quiet time to produce my morning information note. It's a 2-3 page overview outlining my views on how markets are tracking, and it's forwarded to a variety of subscribers including fund investors. By the time the note is finished, it's around 8.30am and the office is starting to buzz.

Significant outperformance

From here I meet with my team of analysts. As a defensive asset manager, Mutual Limited offers investors a safe and predictable outcome, with regular income and a focus on capital stability. We aim to preserve capital while delivering healthy yields by only investing in floating rate, rather than fixed rate, securities.

More importantly, Mutual Limited has an impressive track record of outperforming each fund's benchmark.

This outperformance ranges from 0.17% per annum since inception for our Mutual Cash Fund, which essentially gives investors access to a basket of the best term deposit rates from across the big four banks, through to outperformance of 4.33% per annum since inception in our Mutual High Yield Fund.

While each of our four fixed income funds follows a similar philosophy, there are differences in the underlying investment strategies, eligible investments, and risk and return targets. This keeps my team and I busy throughout the morning reviewing any new securities to weigh up whether they deserve a place in one of our funds.

Access to deals not normally available to retail investors

Mutual Limited gives retail investors access to investment markets that are typically only open to institutional investors. I'm talking about assets such as bonds issued by the major banks, which provide funding for home loan lending.

Two to three such deals come across my desk each day, and it's up to myself and my analysts to evaluate them. Corporate bonds, for example, are assessed for creditworthiness using a broad set of factors including the issuer's underlying business model, asset quality, capital adequacy and liquidity.

After thorough analysis, I'll sit down with the portfolio management team to decide if one of Mutual Limited's funds should invest in a particular deal, or if we should sell an existing bond to invest in another.

I also spend time checking out secondary markets. The bulk of securities we invest in are traded, and if the market pricing is attractive, we may decide to sell some securities.

Nurturing relationships in critical

While I have a real passion for the research side of my role, 25 years of experience in financial markets has shown me that success as a fixed income manager is also about relationships, especially when it comes to corporate bonds.

Mutual Limited has forged strong relationships with the major banks over many years. So, when the banks come to the market with a deal, we are in a good position to provide market feedback to them, and get in early with our interest in order to maximise our potential allocation within the deal.

That's why a large part of my afternoons is spent maintaining relationships with banks and other security issuers as well as marketing our funds to demystify fixed income to investors.

As markets are always changing, it's not always easy to 'switch off', and I like to take a final look at what's happening with interest rates globally before turning in for the night.

It's not just about staying in touch with financial markets.

I am acutely aware of the responsibility we have managing our investors' money. It calls for a defensive mindset while being able to recognise opportunities for our funds to outperform their benchmarks.

It's an ongoing challenge but it is deeply rewarding to deliver regular income to our investors while protecting their capital.

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