An absolute return management approach can provide investors with stability and visibility, whatever the market conditions. It also makes it possible to navigate with agility in an uncertain environment, by diversifying sources of performance and controlling risks.
Global economic conditions remain favourable at the start of 2026. After withstanding the protectionist shocks of 2025 better than expected, growth is stable overall. This, in a geopolitical environment that is still subject to numerous points of tension.
In the short term, the economy is benefiting from favourable financial conditions and, above all, widespread fiscal stimulus in the United States, Japan, Germany and China. At the same time, inflation is returning to target in most countries. However, with political and geopolitical tensions still high and growth potential structurally limited in the long term ̶ by demographics, climate change and globalisation, which has become less intense ̶ the investment horizon is tending to shorten.
The advantages of absolute return management
These uncertainties argue in favour of absolute return bond management, based on broad diversification of assets, sources of performance and financial instruments, with no benchmark constraints. Thanks to this agility and by exploiting a broad spectrum of performance drivers, it is possible to reinforce decorrelation between asset classes, cushion potential market shocks and actively participate in upward movements.
This is precisely the aim of our investment approach, which is based on rigorous management of the sources of risk-adjusted return. The combination of several complementary strategies is designed to enhance return prospects while providing protection and reducing volatility. These strategies include exposure to sovereign debt, corporate bonds, core strategies - performance differentials between two markets, products or asset classes, without directionality - and identifying opportunities in the primary bond market.
Risk and opportunity management
Since the start of the year, valuation levels have continued to tighten on a number of bond markets, for example US and UK sovereign bonds, as well as the credit market. Against this backdrop, we are reducing our exposure to high-yield corporate bonds[1] because of the very low risk premiums currently available. With this desensitisation in mind, core strategies are also playing a central role via long positions in carefully selected bonds, hedged by credit indices.
On the other hand, we are identifying opportunities in certain primary issues of investment grade companies[2] and in the financial bond sector. This selective approach has led us to invest in companies that could benefit from the German stimulus plan, located in countries bordering Germany. We also remain positive on more defensive sectors, such as telecoms, with a strong selection of issuers linked to the theme of artificial intelligence. We have selected stocks such as Swisscom and Addeco for their defensive qualities.
In terms of sectors, we feel that European bank bonds are attractive, given the improvement in their results and the absence of a strong return to shareholders, a factor that is beneficial to the quality of credit ratios. Our diversification objective currently favours a number of Southern European sovereign bonds, which we believe combine an attractive risk-adjusted weighting with relatively low volatility.
Finally, the use of derivatives and credit arbitrage should make it possible to contain volatility while making a positive contribution. In a world where unstable geopolitical relations are the new norm, investment performance depends on flexibility and protection in asset allocation.
Written on 25/02/2026
[1] Speculative-grade "high-yield" bonds with a credit rating of "C" to "BB+" according to the main rating agencies.
[2] Bonds rated between 'BBB-' and 'AAA