Daniel Claringbull
Global Product Manager, DNCA Investments (an affiliate of Natixis Investment Managers)
In the early days of COVID-19, as fears escalated and panic spread through financial markets, the S&P 500 fell by more than 30% and more than $481 billion was withdrawn from global fixed income markets. It was the ultimate black swan event for many investment managers.i
For DNCA, an affiliate of Natixis Investment Managers, like so many others, Covid did not start well. Around one-month after the market correction its flagship fixed income strategy, Alpha Bonds, suffered its biggest ever drop. Of course they were not alone in this, most equity and fixed income strategies experienced sharp falls. However, it was at this time of crisis that one of the key aspects of the alpha bonds strategy came to its rescue, its flexibility.
Flexible by design – swift repositioning the key
At the time of Covid-19 the DNCA Alpha Bonds team was anticipating solid global growth following the resolution of the US-China trade war and so had a short position in (nominal) G10 government bonds and a long position in Treasury Inflation-Protected Securities (TIPs). However, when the Covid-19 pandemic hit, everything changed. The market crashed as central banks slashed interest rates to zero and inflation expectations plummeted, adversely affecting both of these positions.
From February 17 to March 18, 2020, the strategy fell more than 10% its biggest loss ever. However, its flexible setup and high liquidity enabled it to quickly adjust to the new market conditions. The team closed their short position in G10 government bonds and shifted to long G10 government bonds, while maintaining a long position on inflation, with US TIPs. One of the reasons the strategy has such flexibility is because it invests in highly liquid securities like G10 government bonds. You can see in the graph below the big shift the team made in duration and overall positioning in early 2020.
Recovery from biggest ever drawdown in less than 8 months
The quick, significant shift the investment team made allowed the strategy to recover fully from its biggest ever drawdown by November 2020 and deliver positive returns for the calendar year.
While other fixed income strategies may have performed better in 2020, most were focused on yield and so were predominantly exposed to corporate credit. In 2020, liquidity in the corporate credit market essentially dried up, so stranding the assets in these funds until the US Federal Reserve intervened, leading to a recovery in the corporate credit market. DNCA Alpha Bonds is a rare example of a strategy which was able to pivot quickly to the new conditions and turn a loss into a respectable gain, despite entering the COVID crisis in an unfortunate position.
Time for new approaches
This nimbleness and agility is one of the key strengths of DNCA’s flagship fixed income strategy, Alpha Bonds. The strategy is able to take both long and short positions and actively manage its modified duration range of -3 years to +7 years. This flexibility is one of the main reasons the strategy has delivered positive returns every calendar year since its inception in 2019ii.
The investing world has changed. Investors need flexible, liquid strategies that aim to provide consistent returns, no matter what’s happening in the market. Learn more about how DNCA’s fixed income strategy works.
For readers in Hong Kong, click here to learn more.
For readers in Singapore, click here to learn more.
i International Monetary Fund, Morningstar
ii Source: DNCA, 2025
Disclaimers:
Singapore: This document is provided by Natixis Investment Managers Singapore Limited having office at 5 Shenton Way, #22-05/06, UIC Building, Singapore 068808 (Company Registration No. 199801044D). Mirova Division (Business Name Registration No.: 53431077W) and Ostrum Division (Business Name Registration No.: 53463468X) are part of NIM Singapore and are not separate legal entities. The content of this document is strictly confidential and has been prepared for informational purposes only and for the exclusive use of institutional and accredited/professional clients or prospects. Under no circumstance may a copy be shown, copied, transmitted or otherwise distributed to any person or entity other than the authorised recipient without the advance written consent of Natixis Investment Managers Singapore Limited. Investment involves risk. The information contained herein does not constitute an offer to sell or deal in any securities or financial products. The content herein may contain unsolicited, general information without regard to an investor’s individual needs, objectives, risk parameters or financial condition. Therefore, please refer to the relevant offering documents for details including the risk factors and seek your own legal counsel, accountants or other professional advisors as to the financial, legal and tax issues concerning such investments, if necessary, before making investment decisions in any fund mentioned in this document. Past performance and any economic and market trends or forecast are not necessarily indicative of the future or likely performance. Certain information included in this document is based on information obtained from other sources considered reliable. However, Natixis Investment Managers Singapore Limited does not guarantee the accuracy of such information. Natixis Investment Managers Singapore Limited is a business development unit of Natixis Investment Managers, the holding company of a diverse line-up of specialised investment management and distribution entities worldwide. The investment management subsidiaries of Natixis Investment Managers conduct any regulated activities only in and from the jurisdictions in which they are licensed or authorised. Their services and the products they manage are not available to all investors in all jurisdictions. It is the responsibility of each investment service provider to ensure that the offering or sale of fund shares or third-party investment services to its clients complies with the relevant national law. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Hong Kong: The content of this document is strictly confidential and has been prepared for informational purposes only and for the exclusive use of professional investors. Under no circumstance may a copy be shown, copied, transmitted or otherwise distributed to any person or entity other than the authorised recipient without the advance written consent of Natixis Investment Managers Hong Kong Limited. Investment involves risk. The information contained herein does not constitute an offer to sell or deal in any securities or financial products. The content herein may contain unsolicited, general information without regard to an investor’s individual needs, objectives, risk parameters or financial condition. Therefore, please refer to the relevant offering documents for details including the risk factors and seek your own legal counsel, accountants or other professional advisors as to the financial, legal and tax issues concerning such investments if necessary, before making any investment decisions in the fund(s) mentioned in this document. Past performance information presented is not indicative of future performance. If investment returns are not denominated in HKD/USD, USD-/HKD-based investors are exposed to exchange rate fluctuations. Natixis Investment Managers Hong Kong Limited is a business development unit of Natixis Investment Managers, a subsidiary of Natixis that is the holding company of a diverse line-up of specialised investment management and distribution entities worldwide. Certain information included in this material is based on information obtained from other sources considered reliable. However, Natixis Investment Managers Hong Kong Limited does not guarantee the accuracy of such information. Issued by Natixis Investment Managers Hong Kong Limited.
