Credit funds manage to take advantage of all bond market trends. A solution for seeking to boost money market and/or bond returns, with lower volatility, in a portfolio. Food for thought…
It is time for investors to start rebuilding their bond allocations.
The volatility of recent weeks has demonstrated the value of holding funds that combine investment in credit with the quest for low volatility. While equity funds, like other asset classes, suffered a decline caused by events in the Middle East, others, such as some bond funds designed to be flexible and able to take advantage of market movements in both directions, such as absolute return funds, held up remarkably well.
And the soaring yields on the markets as a result of soaring oil prices and the prospect of inflation make these funds even more attractive. A gateway for some analysts.
While these funds have limited the damage, the market has now given them the opportunity to cash in on instruments with higher returns than before the crisis.
A concrete example is the LBPAM Absolute Return Credit SRI fund, a fund with a conservative profile targeting low on-board volatility. The fund’s recipe and key points for robust performance are to optimise the risk/return trade-off by using wide margins for manoeuvre and access to derivatives, while keeping a tight rein on risk.
There are many ways of trying to optimise gains and market movements, such as capturing a premium on the primary market, targeting holdings of short-dated bonds (less than one year), seizing a specific opportunity such as an early call, an opa, etc., capturing spread movements by buying or selling credit spreads, etc. In all, eight different engines work to drive performance.
The last few weeks, with the conflict in the Middle East, have been tense and turbulent on the financial markets. It was important to be able to position ourselves wisely in this difficult period.
Low sensitivity at the end of February
At the end of March, Henriette Le Mintier, Manager of LBP AM Absolute Return Credit SRI, was manoeuvring her fund with a view to taking advantage of this opportunity: “We are now looking for an entry point into risky assets, as our LBP AM Absolute Return Credit SRI fund has entered the current crisis cautiously, thanks in particular to protections already in place and a sensitivity assessed at 1 at the end of February,” said the manager.
As a result, at the end of March, the fund managers had managed to contain the decline to -0.62% (GP share) since the start of the year [1]. In fact, the fund had limited the shocks during this period of a significant rise in yields fuelled by inflationary fears, thanks to the adoption of tactical positions that helped to lower the fund’s volatility. Then, by reaching high points in yields and surfing on the easing that accompanied the start of the ceasefire in Iran, the fund saw its performance begin to rebound. As a result, by 10 April, the fall in prices since the start of the conflict had been wiped out.
High outperformance over three years
The fund’s track record confirms this sound management. Over three years, the recommended holding period for this asset, the fund has performed brilliantly, with a cumulative return of 23.59% (GP share at 09.04.2026) [2] to be compared with its ESTR benchmark, which would have produced a return of 9.52% (ESTR: overnight euro reference rate used in the money market).
Over the last three calendar years (2023, 2024, 2025), the fund has significantly outperformed its benchmark index, exceeding its objective of outperforming the ESTR by 2.5% each year (2023, 8.49% compared with 3.28%, 2024, 8.42% compared with 3.79%, 2025, 4.82% compared with 2.24%) [3]. Mission accomplished.
Finally, compared with other funds in its category, the conclusion remains the same. Since 2020, LBP AM Absolute Return Credit SRI has systematically beaten the average performance of funds in its category on a full-year basis. The fund has outperformed its category with surpluses of between 1.36% (2020) and up to 3.94% in (2024) [4]. All this is wrapped up in historically low and relatively low volatility [5].
The fund’s recipe and key points for achieving these performances remain the optimisation of the risk/return trade-off by using wide margins for manoeuvre and access to derivatives. All this while keeping a tight rein on risk.
Rated 5 stars over 5 years, in 2025, the fund ranked 11th out of 728 funds in the Morningstar rankings and has remained in the top quartile for the last four years.
https://www.lbpam.com/fr/products/fr0013465606#product-performances-section
https://global.morningstar.com/fr/investissements/fonds/0P0001IV39/cours
[1] LBP AM. GP unit at 31/03/2026. +0.48% for the ESTR indicator.
[2] LBP AM. GP share at 09/04/2026. +9.52% for the ESTR indicator.
[3] LBP AM. Part GP.
[4] Morningstar, Part GP.
[5] Volatility of 1.99% over 5 years, GP share at 31/03/2026.
