A highlight in January was the portfolio’s investment into Netflix Inc. The company reported another solid set of financial results for the final quarter of 2020 and management stated the need for external capital to fund ongoing content investment has abated due to growing free cash flow generation. As a result, the company’s stock price and bonds reacted positively with the portfolio’s Netflix bond delivering a total return of circa 4.2% (in local currency terms) during the month. Another portfolio highlight was Ryman Healthcare. Back in December, the company issued its inaugural secured bond which we invested in. This transaction looks to have been well received by investors with the investment appreciating in price over the month reflecting robust ongoing demand.

Growing optimism surrounding both the economic recovery ahead and the likelihood of inflation rising continues to weigh on high-grade bond prices (yields are rising). We have been on guard against such an outcome since late September, when our indicators began suggesting the global economy was shifting from repair in recovery. To protect the portfolio from the adverse impact of a cyclical rise in bond yields, we have been reducing its sensitivity to interest rate movements over the past few months and will likely maintain this tactical approach until the economic outlook looks to be peaking.