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Ideas - Buy & Maintain

26.04.2018

Read a new issue of our ideas series on our Buy & Maintain Bond management expertise.

Many bond investors have traditionally bought securities with the intention of collecting the coupons and holding the debt to maturity. Assets were only sold in the occurrence of a credit event. The aim was to build a portfolio and achieve regular returns, without necessarily looking for capital gains. Insurers in particular were the main proponents of this type of approach for accounting reasons. Furthermore, accounting and tax restrictions that hampered the disposal of these assets increased the appeal of holding them to maturity. This approach, which was initially known as “Buy and Hold”, long suffered from a negative image, as it was considered to be a passive strategy, with the fund manager simply buying the securities and sitting tight until maturity.  However, in today’s context, accounting changes on the one hand and current interest rates and spreads on the other have brought this type of “prudent person principle” fund management back into fashion, and it is now known as “Buy & Maintain” or “Buy & Monitor”. As we will see, this type of approach is far from passive.

 

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On 3 April 2018, Natixis Asset Management became Ostrum Asset Management.