In today’s turbulent market environment, investors face critical questions: How to balance returns with risks? How to identify undervalued opportunities? How to construct a portfolio that combines offense and defense? Chen Yanyi, portfolio manager of Morgan Stanley Tianli 18-Month Open Bond Fund, shares his professional insights.
The fund has achieved an impressive track record of positive annual returns over the past decade. Chen’s distinctive investment framework combines macro analysis, mid-range verification, and micro bond selection, enabling flexible allocation between government and corporate bonds. He specializes in identifying mispriced credit bonds through contrarian strategies and capturing market inefficiencies.
Credit Rating Expertise for High-Safety Bond Selection
With extensive experience in credit rating agencies and research, Chen brings unique risk assessment capabilities to bond selection. His approach emphasizes safety margins while maintaining balanced offensive and defensive positioning through macro and sector analysis.
“My strategy always begins with macroeconomic trend analysis, complemented by dynamic position adjustments and prudent credit selection to achieve stable returns within controlled risk parameters,” Chen explains.
For core portfolio positions, Chen avoids credit quality compromises, focusing instead on coupon payments and roll-down returns. “We identify convexity opportunities in credit bond yield curves where holding periods can generate significant returns. Some corporate bonds can deliver 17 basis points within 2-3 quarters or 25 basis points over 18 months – returns rarely available in government bond markets,” he notes.
Capitalizing on Market Mispricing
Chen highlights structural inefficiencies in corporate bond markets: “Secondary market liquidity constraints often distort pricing. When investors liquidate positions during market stress, we identify fundamentally sound but oversold bonds for contrarian positions.”
In primary markets, Chen’s team monitors new issuance pricing closely. “During market volatility when underwriter support weakens, new issue yields frequently exceed secondary market levels. After reassessing rate trajectories, these often present attractive entry points,” he adds.
Medium-Term Focus with Tactical Flexibility
Chen’s investment process prioritizes medium-term trends while incorporating tactical adjustments. When clear upward trends emerge in bond markets, he emphasizes capturing beta returns from duration exposure rather than short-term trading.
Portfolio construction employs a barbell strategy – combining short-duration, high-coupon corporate bonds with long-duration government bonds. This provides both yield advantage and defensive flexibility. “During market weakness, we can reduce duration exposure while maintaining income from shorter-maturity holdings,” Chen explains.
His trading philosophy emphasizes risk/reward ratios over simple win probabilities. “In today’s efficient markets, even high-probability trades may offer limited returns if market expectations are already priced in,” he cautions.
Global Research Platform Support
Morgan Stanley’s worldwide research capabilities provide critical support. “Our parent company’s global perspectives significantly inform our strategy development,” Chen acknowledges.
With Morgan Stanley Research consistently ranked as Asia’s top research team for 11 consecutive years, its analysts’ macroeconomic and sector insights prove invaluable. The fixed income team maintains regular dialogue with global research and investment teams, enhancing market understanding. “We align our research philosophy while adapting global insights to local market conditions, constantly seeking overlooked value opportunities,” Chen concludes.
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