The bond team that left BNP Paribas Asset Management to join Neuberger Berman has launched three European fixed income funds and says pessimism about the region’s economy is over-blown.
Led by Patrick Barbe, the six-strong team now manages the Neuberger Berman Euro Short Term Enhanced Cash Fund, the Euro Opportunistic Bond Fund and the Euro Bond Absolute Return Fund.
Barbe, who is senior portfolio manager, said that relative to value found in global assets, recent market pessimism towards Europe was “overdone”.
“Growth has disappointed this year relative to the unsustainable levels it reached in 2017, but it remains above trend. In addition, the euro is cheap against the dollar, financial conditions are still loose and the [European Central Bank] leans toward the accommodative.”
He said that, by contrast, “super-bullish” risk premiums are priced into US assets despite uncertainties around the strong dollar, the pace of rate hikes and the “fiscal clean-up” required once tax policy stimulus wears off.
The euro short fund aims to outperform a cash benchmark by 1% over one-year horizon with a volatility limit of 1%, and the euro opportunistic funds aims to outperform the BBG Euro Aggregate Index by 1% over three years.
The absolute return fund is aiming for a cash-plus-3.5% return over three years, irrespective of market conditions, utilising interest rate duration positioning and with a volatility limit of 6%.
Among positioning in euro markets, Barbe said the team had been buying back corporate bonds since the phase-out of the quantitative easing programme was anticipated, and viewed tactical exposure to short-term Italian bonds as attractive.
Barbe also said that “over the medium term, we believe concerns about a big rise in yields and a blowout in credit spreads as the ECB withdraws from these markets to be significantly overstated”.
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