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You're listening to Strictly Business
Podcast with Lindsay Williams.

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Welcome.

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And today we are in conversation with Adam
Furlan, Portfolio Manager for the 91

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Global Diversified

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Income Fund.

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I'm going to start this podcast in a
slightly different way, Adam,

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because I want to know about the Global
Diversified Income Fund as an entity and

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what it's trying to achieve

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for investors.

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And therefore, after that, you need to
tell me who it's best suited to.

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Thanks, Lindsay.

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The Global Diversified Income Fund is a
defensive global income fund.

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It's what it says on the tin.

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Its aim is to outperform US dollar cash
rates by 1.5%.

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But as an equal objective of the
portfolio,

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its aim is to protect capital and prevent
negative returns for investors in this

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portfolio over a rolling

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12-month period.

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It's best suited for investors with lazy
cash in

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dollars that are looking to enhance yield
and have a sort of three to six month

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investment horizon.

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Moving out of dollar cash or a dollar
money market product into the Global

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Diversified Income Fund over that period
is likely to,

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you know, benefit you in terms of returns
without taking too much additional risk in

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a sort

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of low cash type investment.

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Also, a slightly different way of asking a
question is not just the quarterly

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performance.

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that has just been completed, the quarter
that is.

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But also the fund from the beginning,
because it's a very new fund, Adam.

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It's just over 18 months old now.

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So what has it done since inception?

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And has that been meeting your
expectations?

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And then we go on to Q1.

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Yeah, so since inception, the fund has
delivered an annualized return of 6.3%.

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And over that same period, cash has
delivered...

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just above 5% on an annualized basis.

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So the portfolio has outperformed cash by
1.2%.

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That is relatively in line with our
expectations for this portfolio.

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What we've seen over that period since
inception is we've had an inverted yield

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curve.

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So the portfolio's government bond
exposures actually yield less than what

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you can get in cash market,

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but you're obviously utilizing those
investments to lock in yield for longer

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periods than overnight cash.

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And then on the other side of the
portfolio,

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its credit holdings serve to enhance yield
through that additional yield you get

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compensated for through investing

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in high quality corporate credit.

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On a shorter period, so over the first
quarter of this year, the portfolio has

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performed well.

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We've outperformed cash by 30 basis points
to deliver a return of 1.35%.

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And that return was driven by a rally in
bond yields over the first quarter.

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We were quite active in our regional
positioning in the portfolio, being

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diversified outside of the U.S.

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at the start of the year into Europe, U.K.

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and New Zealand.

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And we saw a significant outperformance of
those markets relative to the U.S.

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We then switched that a bit more heavily
into the U.S.

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and that retraced significantly.

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So being active in the global regional
markets, adding to returns.

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And secondly, on the credit side of the
portfolio,

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we had income enhancement on that credit
portfolio overcompensating us for, you

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know,

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the widening and spread risk that impacted
returns marginally.

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OK, we're going to have to inject a note
of nastiness now in the podcast, Adam,

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because we've got to talk about Trump's
tariffs.

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I mean, what have been the impact of
Trump's tariffs on GDI and what do you

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expect them to be in the future?

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Tariffs that are implemented by Donald
Trump, you know, At this point in time,

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we've seen quite a few iterations of them.

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And I think that speaks to just how
uncertain it makes the economic

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environment going forward.

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You don't actually know what the tariff
rate is going to be on which economy.

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And that increases volatility.

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So naturally, that makes us a little bit
more risk averse in a portfolio trying to

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protect capital.

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So for GDI, we have concentrated our
investments in lower risk, higher quality

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credits.

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and obviously defensive duration, not
higher risk duration like emerging

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markets.

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So from that perspective, we have
positioned the portfolio more defensive.

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But as a result of the uncertainty in
global markets, we have seen volatility in

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credit spreads,

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which impacted the portfolio negatively.

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From an economic perspective, inflation
and growth, you know, tariffs are

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inflationary.

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You know, there are attacks on imports of
products that...

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you know that makes it harder for central
banks to cut rates in the face of the

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impact that the

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uncertainty as well as the tariff will
have on demand impacts growth of various

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economies around the world

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the tariff impact is likely to be
stagflationary add

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to inflation detract from growth and for
In that environment,

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we think, you know, best to be positioned
in income that is reliable,

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high quality credit investments and
defensive durations in a world of

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portfolio globally.

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What do you think if the Trump tariff
thing does sort of blow over in whenever

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it might be, whether it be in one month or
six months,

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you will then, of course, adjust the
portfolio accordingly?

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Yeah, most definitely.

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You know, the volatility that we're
currently experiencing, things.

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does present us opportunities.

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And when we do feel like we have a bit
more certainty on the economic

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environment,

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or we do feel like there is too much risk
priced into certain economies or certain

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credit

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markets, we would definitely use those
opportunities to enhance yield on the

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portfolio,

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whilst always bearing in mind we do have a
capital protection bias on the portfolio,

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so don't over-risk in an uncertain
environment.

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Why is it so important, from your point of
view, for investors to lock in longer

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dated instruments in this current
environment.

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Can you explain that, please?

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Yeah, so we are actually late cycle in the
global economic cycle.

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We've had a period of very strong growth
and that is starting to slow.

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We're seeing labor markets coming back
into balance.

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We've seen inflation come off the highs.

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We're seeing the sequential growth
starting to slow.

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We're late cycle.

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And late in the economic cycle, it's also
very uncertain with what's happening in

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our economic environment.

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But we may be in a position where cash
rates could fall quite quickly over the

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next 6 to 12 months.

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It's not our base case.

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We think the uncertainty keeps central
banks a bit more cautious in reducing

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interest rates.

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However, if we do see a big growth shock,
we can see US dollar cash rates fall from

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their current

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4.3%. Quite quickly, you could be at 3.3%.

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So if you haven't locked in your cash,
your income investments into longer-dated

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assets,

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you will be detrimented immediately in a
cash investment.

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And that's why we are proponents of
locking in cash for a little bit longer to

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enhance income over an uncertain

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environment.

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Reading the blurb around the Global
Diversified Income Fund, Adam, I came

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across a new acronym.

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I know FOMO, but I didn't know FOMI, fear
of missing income.

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What's your view on FOMI?

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Yeah, it's exactly as I've explained,
Lindsay.

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We're in a position in the...

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In the global fixed income universe where,
you know, we have 4% cash rates in U.S.

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dollars yields on, you know, your 10-year
treasury is above 4%.

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Globally, we are being offered levels of
income that we haven't really seen before

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in pretty

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low-risk investments.

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So, you know, massive sovereign bond
markets are offering you very attractive

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levels of income.

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So the fear of missing income is, you
know, should we see an economic slowdown,

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these yields will fall very quickly.

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Fear of missing out on the current levels
of income is what we refer to when talking

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about FOMI.

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Got you on that one now.

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Now, I've noticed that you have a
differentiation in your bond market

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exposure in the portfolio.

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I mean, everywhere from New Zealand and to
the United Kingdom and points around and

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points in between.

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It's not just a case of having a look at
the world map and saying, right, that's

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it.

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Interest rates are going to come down.

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Let's just buy good quality liquid bonds.

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stick them in the portfolio.

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It's not quite as easy as that, is it?

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Because there are so many differentiations
between the economy of New Zealand and

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America and Argentina,

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whatever it is.

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Can you sort of elaborate on your
investment thinking when it comes to

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bonds?

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Yeah, most definitely.

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I think, you know, firstly, from a
diversification perspective,

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I think what we learned over the start of
April is that, you know, the US bond

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market has behaved.

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it has been quite volatile, and we've seen
a big dispersion in returns across

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sovereign bond markets, across the
developed market space.

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So, you know, having diversification
across DM rates markets is very important.

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And at 91, our developed market macro
process, you know,

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we have regional specialists covering each
of these regions, each of these economies,

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you know, quite thoroughly.

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And in that process, I think we look to
New Zealand.

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and the United Kingdom to be our preferred
areas for duration, for sovereign bond

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investments.

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And, you know, that is the thesis that
those economies, you know, have had high

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levels of rates.

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They're currently in a restrictive policy
setting.

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And what you see in terms of what the
market is pricing in.

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is actually quite a shallow rate-cutting
cycle.

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And we actually saw the Central Bank of
New Zealand cutting rates earlier this

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week.

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And we expect that, you know, those two
economies will slow enough that will allow

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the Central Bank of New Zealand

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as well as the Bank of England the

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room to cut rates a bit more aggressively
than the likes of the Fed or even the ECB.

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And for that reason, you know, you're
likely to earn, you know, firstly,

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you're currently earning more attractive
yields in those economies relative to the

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US, relative to Europe.

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And secondly, if the market does, you
know, eventually realize that these

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economies are going to slow and these
central banks will react,

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you will earn, you know, handsome capital
returns as a result of that.

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Adam, thanks so much for that.

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I really wish you all the success in these
very turbulent times.

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Adam Furlan is Portfolio Manager for the
91 Global Diversified Income Fund.

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The views and opinions expressed in these
podcasts are those of Lindsay Williams and

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various contributors and do not reflect
the policy,

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position or opinion of any other agency,
organisation,

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employer or company associated with
StrictlyBusinessPodcast.com.

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assumptions made on the analyses are not
reflective of the position of any other

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entity other than the speaker or the
author

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and since we are critically thinking human
beings these views are always subject to

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change revision

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and rethinking at any time.

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Please do not hold us to them in
perpetuity.