Key Takeaways
- • Asgard Fixed Income Fund generated a 19% return over the past year by concentrating its portfolio exclusively in AAA-rated debt instruments, eliminating credit risk exposure while employing leverage to amplify returns.
- • The fund has delivered a consistent 14% annualized return since inception in 2003, outperforming Bloomberg's government bond index and demonstrating sustained performance across a two-decade track record.
- • The strategy demonstrates that superior returns can be achieved in fixed income through disciplined leverage and credit quality selection without taking on traditional credit risk, challenging conventional assumptions about bond market constraints.
- • The fund's approach represents a counterintuitive positioning in 2017's low-yield environment, where institutional investors increasingly deployed leverage on the safest asset classes rather than pursuing higher-risk credit strategies.
Summary
Asgard Fixed Income Fund, a Danish hedge fund, delivered a 19% return over the past 12 months through a concentrated investment strategy focused exclusively on AAA-rated debt securities. According to Bloomberg, the fund's approach relies on selective positioning in the safest bonds available, while utilizing leverage to amplify returns without assuming credit risk. This strategy stands in contrast to typical hedge fund bond plays that often involve leveraged bets on higher-yield credit instruments or catastrophe bonds.
The fund's performance extends well beyond a single exceptional year. Since its inception in 2003, Asgard has delivered consistent 14% annualized returns, establishing a track record that has outperformed major bond benchmarks including Bloomberg's government bond index. This longevity suggests the strategy is not a tactical bet but rather a repeatable framework that has persisted through multiple market cycles and yield environments.
The 19% annual return through exclusive positioning in AAA-rated securities highlights an important market dynamic: in a persistently low-yield environment, sophisticated investors can achieve substantial returns through leverage applied to the highest-quality fixed income instruments rather than accepting credit risk premiums. Most of the fund's allocation resides in AAA-rated debt, reflecting a disciplined credit quality requirement that eliminates exposure to default or downgrade risk. This approach offers institutional investors an alternative to the conventional trade-off between yield enhancement and credit risk mitigation.
Asgard's performance in 2017 reflects broader hedge fund success in fixed income strategies, with "opportunistic" bond-focused hedge fund strategies reported to deliver 19% returns according to Preqin data. The fund's results demonstrate that leverage, when applied to the safest borrowers and securities, can generate compelling returns for sophisticated capital allocators willing to employ structural leverage techniques in the investment-grade bond markets.
The fund's performance extends well beyond a single exceptional year. Since its inception in 2003, Asgard has delivered consistent 14% annualized returns, establishing a track record that has outperformed major bond benchmarks including Bloomberg's government bond index. This longevity suggests the strategy is not a tactical bet but rather a repeatable framework that has persisted through multiple market cycles and yield environments.
The 19% annual return through exclusive positioning in AAA-rated securities highlights an important market dynamic: in a persistently low-yield environment, sophisticated investors can achieve substantial returns through leverage applied to the highest-quality fixed income instruments rather than accepting credit risk premiums. Most of the fund's allocation resides in AAA-rated debt, reflecting a disciplined credit quality requirement that eliminates exposure to default or downgrade risk. This approach offers institutional investors an alternative to the conventional trade-off between yield enhancement and credit risk mitigation.
Asgard's performance in 2017 reflects broader hedge fund success in fixed income strategies, with "opportunistic" bond-focused hedge fund strategies reported to deliver 19% returns according to Preqin data. The fund's results demonstrate that leverage, when applied to the safest borrowers and securities, can generate compelling returns for sophisticated capital allocators willing to employ structural leverage techniques in the investment-grade bond markets.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.