Global quantitative manager Ossiam has unveiled a new systematic fixed income strategy that uses a market-neutral and duration-neutral approach to capitalize on investor appetite for fixed income alternatives amid ongoing uncertainty over rates and inflation.

The Ossiam Multi Fixed Income Opportunities fund offers investors exposure to a broad selection of fixed income relative value strategies, running a strict duration-neutral mandate with a focus on low correlation and portfolio diversification.  

The model runs about 20 different investment strategies overall, split across four distinct strategy families – interest rates, foreign exchange, credit and arbitrage – trading long and short with a global scope focusing mostly on OECD countries.

The volatility of the overall strategy will be 4%, with a Sharpe ratio of 1.1.

Ossiam, a Paris-based affiliate of Natixis Investment Managers, has approximately $10.5 billion in assets under management. The firm manages a range of absolute return and enhanced beta strategies in both equities and fixed income markets, via active and passive ETFs, mutual funds, dedicated funds and bespoke solutions.

“We think there is room for a duration-neutral product,” Luc Dumontier, head of investments and operations at Ossiam in Paris, told Alternatives Watch. “We feel we will be able to deliver true alpha, and we have customized our different sub-strategies in order to do so by being credit neutral, duration neutral, etc., not only on average, but at any given moment. For absolute return-type funds, we think it’s better to be duration-neutral.”

Describing the MFIO as a “compelling addition” to investors’ portfolios, he explained how the new strategy offers a portfolio diversification solution for end clients, while also serving as a fixed income alternative for investors growing increasingly nervous about the inflationary pressure potentially arising from incoming U.S. president Donald Trump’s planned trade tariffs. 

“It always makes sense to diversify an allocation with such a duration-neutral strategy – you increase your expected Sharpe ratio by combining uncorrelated assets,” Dumontier said. “For more absolute return-type clients, we think equity markets are a bit high, given where valuation metrics such as, for example, CAPE ratios are currently, especially for the U.S. market. Credit spreads are also currently very much compressed.”

He added: “We are not agnostic to what will happen in the market – obviously, as with any active manager, we prefer volatility in the market, because volatility represents opportunities for us. But while we think we will be more able to generate a return in more volatile markets, with more dispersion in G10 interest rates or FX, even if the market goes down, if interest rates go up and credit spreads widen, we still think we will be able to deliver alpha in this context.”

The new strategy is a UCITS-compliant fund offering daily liquidity.