Bond managers get fundamental

EVEN before bond yields ripped through the roof this month, some asset managers had begun quietly shifting strategies in a fundamental way: less index, more brain. Instead of delving deeper into matching benchmarks that are now loaded with negative-yielding debt, they're returning to more traditional methods of picking according to fundamentals. That means looking for governments narrowing deficits or company turnarounds.

While the sell-off shook markets and drove up yields from New York to Zurich, 28 per cent of the investment grade securities in the US$45 trillion Bloomberg Barclays Global Aggregate Index still earn less than one per cent.

That's been driving investors including J P Morgan Asset Management to increasingly buy lower-rated debt to avoid holding securities such as the AAA Dutch five-year bond yielding minus 0.25 per cent - just because it's in an index they're measured by.