In the final quarter of 2025, the global economic landscape demonstrated notable resilience, with the third-quarter gross domestic product (GDP) maintaining a robust growth rate near 3.5%, consistent with the pace observed in the second quarter. This period was characterized by a complex interplay of international trade dynamics and evolving market conditions. However, the Nomura Global Bond Fund's Institutional Class shares experienced an underperformance relative to its benchmark, the Bloomberg Global Aggregate Index, when hedged to USD, yielding a return of 0.58%.
Amidst these broader trends, several strategic allocations significantly bolstered the fund's performance. Investments in high-yield corporate bonds proved to be a key positive factor, contributing substantially to returns. Furthermore, astute positioning along the yield curve and discerning security selection within emerging markets also played crucial roles in mitigating the impact of overall underperformance. These targeted strategies underscore the fund's active management approach in navigating a challenging yet resilient economic environment.
Looking ahead, the fund management maintains a favorable outlook on agency mortgage-backed securities (MBS) and specific segments of the securitized credit market. This includes an interest in non-agency residential mortgage-backed securities, reflecting a calculated assessment of their potential for generating returns. The overarching strategy for the fund remains one of caution, characterized by a defensive posture. This involves maintaining substantial liquidity, which positions the fund to capitalize on prospective market fluctuations. This approach also emphasizes preserving high-quality carry, ensuring that the fund can sustain returns while preparing for future opportunities.
The economic resilience witnessed in 3Q GDP, coupled with specific successful investment allocations, provides a nuanced picture of the fund's activities. While the broader market conditions presented headwinds, the strategic choices in high-yield corporates, yield curve management, and emerging markets highlight the active efforts to generate value. The ongoing focus on liquidity and high-quality carry signifies a proactive stance, designed to navigate market volatility effectively and leverage emerging investment opportunities.
