Investor's Passport to Hedge Fund Profits: Unique Investment Strategies for Today's Global Capital Markets

CHAPTER 5

Global Fixed-Income Investment Concepts

As manager of your own hedge fund, you have a wide variety of instruments to consider for inclusion in your portfolio. Although it is likely that equities will serve as your primary tools, you should be able to find a useful role for bonds, as well. Many who have invested exclusively through equities do not know much about bonds, except for the basics. Our outlook has always remained that an instrument that is perfectly investable and accessible by the individual investor is an instrument worth considering.

To most, fixed-income securities are not nearly as exciting as equities because they do not offer the same potential for supersonic returns, but that is a bit deceiving. In terms of an asset class that can achieve equity-competitive returns in the right climate, bonds are an excellent complement to the other asset classes that compose your hedge fund. For example, at this writing, there are excellent opportunities brewing globally in the investment-grade corporate bond sector; we are talking about senior debt of terrific quality that is proving to be the beneficiary of improving valuations throughout a variety of industries and companies around the world; this circumstance is accompanied by a marked increase in the issuance of global government bonds, which in turn is laying the foundation for investors to move out of government debt and into high-yield corporates that have an increasingly appealing level of creditworthiness. ...