The opportunity
Fixed income markets are shaped by changing interest rates, inflation dynamics, geopolitical developments and structural shifts across the global economy. These forces continuously reshape the opportunity set, rewarding investors who combine macroeconomic insight with disciplined security selection and rigorous risk management.
We believe resilient income is not created by forecasting a single outcome, but by building portfolios that can navigate multiple scenarios while preserving capital through changing market environments.
That is why we manage fixed income actively and security by security. Starting yield is one of the strongest predictors of long-term return, so we invest in income we can assess with confidence while maintaining the discipline, liquidity and flexibility to respond when markets create compelling opportunities.
We build resilience into the portfolio itself. Quality comes first, duration is managed deliberately and liquidity is maintained as a strategic allocation, allowing income to remain resilient even through periods of market stress.
We underwrite every issuer on its own merits and hold only the positions that earn a place. Because we are not obliged to deploy vast pools of capital, we can work where value persists precisely because fewer investors can reach it.
Fixed income is lending, to governments and companies, in exchange for a contractual stream of interest and the return of principal. In a portfolio it is usually asked to do two things at once: pay a dependable income, and hold its value, or gain, when equities fall.
We would add a third. Managed well, fixed income is also the part of a portfolio with the liquidity to act when markets dislocate. That optionality is, in our view, its most underrated quality.
Because the bond market is structurally different from the equity market. A large share of it is held by non-economic participants (central banks, commercial banks, insurers) whose mandates create persistent pricing inefficiencies. A bond index weights issuers by how much they owe, so passive ownership concentrates in the most indebted borrowers. And index rules force mechanical selling when bonds are downgraded or approach maturity, at exactly the moments prices are weakest.
Each of these is a cost to the passive holder and an opportunity for the selective one. We do our own credit work, choose our own moments, and are willing to be the buyer when the index must sell.
Through four sources, and we are explicit about each. Carry: the yield a bond pays for holding it; starting yield remains the most reliable predictor of long-term return. Roll-down: the price gain as a bond ages along an upward-sloping curve. Spread: the extra yield for bearing credit or liquidity risk, which we insist on being paid properly to take. And convexity: the asymmetry, largely in rates and options, that lets a position gain more than it loses when yields move sharply.
Income is the reliable core; the rest we add only when the price is right.
The universe is broad, and each instrument earns its place for a different reason:
Breadth is itself a defence: with a wide range of issuers and instruments, credit, duration and liquidity can be diversified far more finely than any single market allows.
By separating the risks a bond carries and pricing each one. Interest-rate risk (duration) sets sensitivity to the level of yields; credit risk to a borrower’s health; inflation risk to the real value of a fixed coupon; liquidity risk determines whether you can sell when you need to.
We manage duration actively, insist on quality and diversification, and treat liquidity as a position in its own right. Being able to sell, or to buy, at the moment that is wrong for everyone else is where fixed income earns its keep. We size to the drawdown, not just to the yield.
Three disciplines. An absolute-return orientation: portfolios are built to meet each client’s return and risk objectives, not to shadow the composition of an index. Security-by-security selection: we underwrite every borrower ourselves, because return in credit is won or lost one issuer at a time. And the advantage of focus: as a focused firm we can act on opportunities that sit below the radar (or outside the mandates) of much larger pools of capital, and move on them quickly.
Alongside the bond book, we use derivatives deliberately: to hedge, to shape duration, and to hold the convexity that turns market stress into opportunity.
Fixed income is not risk-free. Rising interest rates reduce the value of existing bonds; borrowers can default; inflation can erode the real value of a fixed coupon; less-liquid bonds can be hard to sell in stressed markets; and derivatives carry their own counterparty and basis risk.
We manage these through quality, diversification, and active duration and liquidity management. Capital is nonetheless at risk, and past performance is not a reliable indicator of future results.
We organise fixed income around the role each part plays for an investor, and combine them to match the resilience each client wants.
A core of high-quality government and corporate bonds held for their contractual coupon. We prioritise credit quality and diversification, manage duration actively, and aim for a dependable, repeatable income rather than the highest headline yield: starting yield remains the most reliable driver of long-term compounding.
The part of the portfolio designed to work in a drawdown. Through duration and carefully chosen convexity, largely in rates and options, we hold positions built to appreciate when risk assets sell off, offsetting losses elsewhere and steadying the broader portfolio.
We hold liquidity in reserve and deploy it when credit spreads widen, index rules force selling and markets dislocate, acquiring quality cash flows at valuations available only when other investors are constrained.
For most investors, the answer is a blend. We combine income, protection and opportunity into a single, risk-calibrated allocation: a fixed income portfolio built to hold together through the whole investment cycle.
Every instrument in the bond market carries a different mix of rate sensitivity, credit exposure, structure and liquidity. Knowing those mechanics and where active selection is actually rewarded is the core of our craft.
Mechanics
The highest-rated (typically AAA/AA), most liquid instruments in the market. With little or no credit spread, their price is driven almost entirely by interest rates: they are pure duration, and the natural home of a portfolio’s defensive liquidity.
Where we add value
We treat government bonds as the portfolio’s primary instrument of duration and liquidity management: positioning along the curve and across markets, managing duration deliberately, and holding the liquidity reserve that allows the rest of the portfolio to act when spreads dislocate.
Mechanics
Bonds rated BBB-/Baa3 or better, issued by companies whose prompt payment is judged relatively secure. Typically senior unsecured claims; returns combine the rate component with a moderate credit spread, and prices respond to both.
Where we add value
The index owns the largest borrowers by construction; we underwrite issuer by issuer instead, avoid balance sheets we would not lend to at any spread, apply discipline in new issues, and rotate along curves and sectors where relative value is genuine rather than merely apparent.
Mechanics
Bonds whose principal and coupons are indexed to inflation: the yield is a real yield, and the return depends on realised inflation relative to what the market had priced. They are the one instrument whose payments rise with the price level itself.
Where we add value
We hold inflation-linked bonds when breakeven rates underprice the inflation outcomes we consider plausible, and size them as real duration within the protection allocation: a hedge for the scenario that most damages conventional bonds.
Mechanics
Treasury bills, commercial paper and floating-rate notes: instruments with little or no duration, whose coupons reset with short-term rates. They are where a portfolio holds its liquidity and, when curves are flat or inverted, where it can be compensated while waiting.
Where we add value
We treat cash and floating-rate instruments as an active position rather than a residual: the reserve that funds action when spreads dislocate, earning carry without surrendering the option to move.
Mechanics
Issuers rated BB+/Ba1 or below pay materially higher coupons to compensate for default risk. Maturities tend to be shorter, so rate sensitivity is lower: returns are driven mainly by credit, and behave more like the economy than like rates. Many issues are senior secured, which historically supports better recoveries than unsecured paper.
Where we add value
This is a market that rewards selection by issuer rather than exposure by category. We take exposure only where the spread clearly compensates the risk, avoid crowded structures, and act when rating downgrades force index-bound holders to sell sound businesses at depressed prices.
Mechanics
Corporate bonds with an embedded right to convert into the issuer’s shares at preset terms. The bond provides a floor; the conversion right adds equity optionality, so the instrument is naturally asymmetric: sensitive to equity prices and their volatility as well as to credit.
Where we add value
Convertibles are a means of acquiring convexity, and convexity has a price. We hold them when the option is undervalued relative to the credit, sizing positions so the asymmetry works for the portfolio rather than adding unintended equity exposure.
Mechanics
Instruments deeper in the capital structure: behind senior creditors, ahead of (or alongside) equity. They pay higher, often fixed coupons in exchange for lower recovery if the issuer fails, and typically carry structural features that matter: call schedules, coupon resets, discretionary payments.
Where we add value
Here the analysis is structure by structure, not only issuer by issuer. We lend deep in the capital structure only to businesses whose senior debt we would also own, and we price every call and reset feature before committing capital.
Mechanics
No periodic interest: bought at a discount, repaid at par, with the return locked into that gap. With no coupons to reinvest, they carry the longest duration per unit of maturity; small yield moves produce large price moves.
Where we add value
We use zero-coupon bonds as a precision tool: the most capital-efficient way to hold duration and convexity in the protection allocation, where their sensitivity to falling yields is most effective.
Mechanics
Claims backed twice over: by the issuer and by a ring-fenced pool of assets that remains available to bondholders if the issuer fails. The result is a defensive instrument with tight spreads and strong regulatory frameworks in most European jurisdictions.
Where we add value
The work is in the collateral and the framework: we analyse the quality of the pool and the strength of the legal regime, jurisdiction by jurisdiction, and hold covered paper where it genuinely adds protection per unit of yield foregone.
Mechanics
Futures, swaps and options do not add a new asset class: they reshape the ones we own, adjusting duration without selling bonds, hedging unwanted currency or credit exposure, and providing the convexity that cash instruments cannot deliver efficiently.
Where we add value
Derivatives are central to our all-weather discipline. We use them to keep the portfolio asymmetric, protected against the moves that hurt and exposed to the ones that reward, with counterparty and basis risk managed as deliberately as the positions themselves.
Resilience first, return second
We build fixed income to survive the drawdown, because the return that compounds is the one that is never given back. We start from capital preservation and liquidity, add income from high-quality bonds selected one issuer at a time, and shape the whole with duration and convexity so that the portfolio is asymmetric: positioned to lose less than it gains when markets move.
We size every position to a stressed case rather than a benign one, and we maintain the flexibility to turn volatility to our clients’ advantage. In fixed income, resilience and return are not in conflict; over a full cycle, they are the same objective.
Our capabilities extend across a broad range of investment strategies designed to address different objectives, market environments and risk profiles.
Discover moreAt V PLUS PLUS, we offer carefully selected investment opportunities designed for long-term value and sustainable growth. Our expertise helps you invest with confidence. Ready to explore your next opportunity?
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