Mondrian Global Fixed Income Fund

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Fund Facts as of December 31st, 2016

ISIN IE00BD87QT41
Total Expense Ratio* 0.55%
Management Fee 0.45%
Benchmark Citigroup WGBI (Hgd EUR)
Inception Date 11/23/2016
Base Currency EUR
Entry / Exit Charge Nil
Minimum Initial Investment $5,000,000
Minimum Subsequent Investment $1,000,000
NAV price (Previous BD price)
NAV date (Previous BD date)
Hedged EUR

Fund Features

Universe of Securities

Mondrian will consider investing in the government debt of all countries within the Citigroup World Government Bond Index and other developed world bond markets. We continually research countries within the emerging world and may allocate between 0- 15% of the portfolio in such bond markets.

Sovereign and supranational issues comprise the vast majority of a portfolio

Country Allocation

Country allocation is determined by relative Prospective Real Yields (PRY). The top-level allocation is then determined by an optimization procedure that seeks to maximize portfolio PRY subject to tracking error. High PRY markets are overweighted, subject to constraints on the degree of dispersion from the benchmark index.

Inflation forecasting is a key feature of our approach. We forecast inflation using econometric models for each local currency market. These capture the statistical relationships between demand-pull and cost-push price pressures. These models are supplemented by a quantitative analysis of factors that past statistical relationships might not capture but will affect future inflation, such as changes in government tax policy.

In order to assess sovereign credit risk, we take a quantitative approach that rates a country on four fundamental sets of factors (i) its domestic economy (ii) its institutional strength (iii) the country’s external sector and (iv) its fiscal outlook. If necessary, this rating leads to an adjustment to a country’s Prospective Real Yield (PRY) measure.

Currency Allocation

Currency management is seen as integral to a portfolio’s total return. We believe that if a local bond market offers good value, the currency is likely to appreciate. However, there are situations when a currency may be undervalued or overvalued. In such situations portfolio currency exposures may differ from country exposures.

Forecasting currency movements consistently is impossible in our opinion. We, therefore, take a Purchasing Power Parity (PPP) valuation approach in order to gauge the fair value exchange rate of a currency. The PPP fair value exchange rate between two currencies is one that maintains purchasing power between them so that a basket of goods and services costs the same using either of the currencies. Since there are many influences on short term currency movements, actual exchange rates will deviate from these fair values. However, when those deviations become large enough that the currency is extremely over or undervalued then we may decrease or increase exposure to that currency.

When a bond market is overvalued but its currency is overvalued we will use defensive hedging. On mandates that are already currency hedged mandates, we may further add value by opportunistically removing hedges when currencies are extremely undervalued.

Duration

We add further value and control interest rate risk through our duration/maturity strategy, although decisions on duration/maturity are secondary to the country/currency allocation. Mondrian employs a high duration/maturity strategy in markets that have relatively high PRYs to maximize the advantage. Similarly, we will adopt a low duration/maturity stance where PRYs are relatively low as a defensive move. Typically, our overall portfolio duration is 75% to 125% of index.

The Citigroup World Government Bond Index (Hedged EUR) measures the performance of fixed-rate, local currency, investment-grade sovereign bonds, hedged to Euro.

* Mondrian Investment Partners Limited (the Investment Manager) has contractually agreed to cap Administrative Expenses at 0.10% of the daily Net Asset Value of the Fund. This limit does not apply to or include the Management Fee, transaction related expenses and any nonrecurring expenses.

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