Markets and strategies
Absolute Return Bonds Strategy: 5 questions for the fund manager
Zakaria Darouich, fund manager at CPRAM, provides an overview on an Absolute Return Bonds strategy. This fixed income strategy takes an “absolute return” approach, seeking to achieve the best possible performance over the recommended investment period, with limited volatility (10%). To achieve its objective, it may invest in the fixed income, credit, and currency markets, among others, and benefits from potential sources of diversification in terms of geographical regions, maturities, and credit quality.
Published on 1 June 2025
Could you briefly describe the Absolute Return Bonds strategy you manage?
Zakaria Darouich : This strategy is an actively managed international bond solution, invested according to an absolute return approach. It is distinguished by its broad investment universe: it can gain exposure to different segments of the credit, fixed-income, and currency markets across all geographical regions. Finally, it is characterized by a structural bias towards yielding assets, i.e., assets likely to generate regular income, while maintaining flexible and diversified management to try to seize market opportunities.
You talk about absolute performance. Could you elaborate on this a little?
The aim of an “absolute return” approach is to achieve the best possible performance, whatever the performance of the markets. In other words, we aim to generate positive returns regardless of market conditions, whether the markets are bullish or bearish.
To achieve this objective, the strategy seeks to capture different performance drivers depending on market cycles. It can therefore invest in a wide range of markets (credit, fixed income, currencies, etc.), and we manage these positions using various strategies, such as arbitrage, curve positions aimed at anticipating and benefiting from changes in the yield curve, and directional positions.
You say you manage “according to the cycle.” How is this reflected in your management?
The strategy comprises 3 investment pockets, which are dynamically allocated. These 3 pockets have different profiles. Two are “yield” pockets: one is managed like a traditional credit strategy, invested in a broad spectrum of credit markets, and whose performance will be relatively correlated with theirs. The second pocket, “Satellite”, is also designed to provide yield, but above all a source of decorrelation from the markets, for carry strategies, particularly during unfavorable phases in the credit cycle.
Finally, the 3rd Overlay pocket aims at limiting portfolio volatility by managing derivative instruments; its purpose is to play an “insurance” role. Through its 3 pockets, we can adapt the portfolio’s profile according to (i) changes in credit cycles, (ii) our market scenarios, drawn up internally by our Strategy team, or (iii) identified opportunities—always with the same aim of optimizing the risk/return trade-off and capturing the performance drivers available on the market.
What is the level of risk associated with this investment that investors should accept?
Today, the strategy is characterized by an SRI of 3[1]. We have defined a maximum ex-ante volatility level of 10%. Under normal market conditions, our realized volatility target is between 4% and 6%[2]. This allows us to control risk while seeking to optimize performance.
A final word?
I’m proud to announce that the strategy has been awarded its 5th star by Quantalys, as well as its 4th Morningstar star over 3 years[3]. These awards seem to reward our methodology and allocation choices, and more particularly the changes made to the process and the management taken over 3 years ago by the team in place today.
[1] The synthetic risk indicator allows you to assess the level of risk of this product relative to others. It indicates the probability that this product
will incur losses in the event of market movements or our inability to pay you. We have classified this product as risk class 3 out of 7, which
is a medium risk class. In other words, the potential losses associated with the future performance of the product are medium and, if market
conditions deteriorate, our ability to pay you may be affected. Additional risks: Market liquidity risk may increase the volatility of the product’s
performance. As this product does not provide protection against market fluctuations, you may lose all or part of your investment. In addition to
the risks included in the risk indicator, other risks may affect the Fund’s performance.
[2] Internal constraints mentioned do not necessarily correspond to the limits set out in the prospectus or by law. These internal guidelines are
used to guide the day-to-day management of the portfolio’s investments. They are subject to change and should not be considered a long-term
view of the portfolio’s exposure, limits and/or risks.
[3] Data as of June 19, 2025. Past performance is not indicative of future results. © 2025 Quantalys, Morningstar. All rights reserved. The
information, data, analysis, and opinions (Information) contained in this document: (1) include proprietary information of Quantalys/Morningstar;
(2) may not be copied or redistributed; (3) do not constitute investment advice; (4) are provided for informational purposes only; (5) are not
guaranteed to be complete, accurate or timely; and (6) may be derived from Fund data published at different times. Quantalys/Morningstar is not
responsible for any business decisions, damages, or other losses related to the information or its use. Please verify all information before using
it and do not make any investment decisions without the advice of a professional financial advisor. Past performance is not indicative of future
results. The value and income from investments may go down as well as up.
Warning
For more details on risks, investment policy, costs, ancillary fees and other expenses, please refer to the PRIIPS Prospectus and DIC available at https://cpram.com/fra/en/institutional/products/FR0010325605.
The fund is mainly exposed to the risk of capital loss, the risk of seeking overexposure, credit risk, currency risk, interest rate and market risk, the risk of falling/rising inflation, arbitrage risk, the risk associated with investments in emerging countries, volatility risk, liquidity risk, counterparty risk, liquidity risk associated with temporary sales and purchases of securities and/or total return swaps (TRS), and discretionary risk. There is no guarantee that the professionals currently employed by CPRAM will continue to be so, or that the past performance or success of an employee will serve as an indicator of that employee’s future performance or success. Subject to compliance with its obligations, CPRAM cannot be held liable for any financial or other consequences resulting from the investment. All regulatory documentation is available in French on the website www.cpram.com or on request from the management company’s registered office.