Huge outperformance of this bond fund is hard to ignore

Few bond funds succeed in consistently outperforming their benchmark over a five-year period. However, OHV’s Fresh Fixed Income Fund managed to achieve an impressive outperformance of 25%, without taking on additional risk — quite the opposite, in fact.

“We distinguish ourselves not by staying close to the benchmark but by making decisions based on our interest rate outlook and seizing opportunities as they arise,” explains fund manager Otto Bazuin.

Maturity matters

A key reason behind the fund’s strong performance was the strategic decision in 2021 to reduce the average maturity of the bonds in the portfolio to six months, while the benchmark had an average maturity of seven years. When interest rates surged in 2022, investors in long-term bonds suffered significant losses, but the Fresh Fixed Income Fund experienced minimal impact.

“The advantage of having shorter maturities was that we could gradually shift into bonds with longer durations offering much higher yields,” says co-fund manager Richard Abma, who is also responsible for OHV’s overall investment strategy.

Richard Abma

A smart call

But it wasn’t just the choice of shorter maturities that paid off. According to Bazuin, the benchmark mainly includes companies with high debt levels, whereas he and his colleagues prefer bonds from companies outside the benchmark that have stronger balance sheets. “Because bonds from these companies are automatically purchased less often, they not only offer higher yield premiums but also come with lower risk,” he adds.

A good example of a smart decision was the purchase in 2024 of a bond issued by a Swedish real estate company that owns housing in Rotterdam. While a real estate crisis was unfolding in Scandinavia — causing real estate bond prices to drop over 30% — the company they invested in was entirely unaffected by that crisis. “Still, the company’s name triggered massive selling pressure, which turned out to be completely unjustified. Three months later, the bond’s price had recovered to its previous level,” says Bazuin.

Otto Bazuin

About the fund

The Fresh Fixed Income Fund by OHV is a globally diversified bond fund that allocates roughly 65% of its portfolio to investment-grade debt and about 35% to high-yield securities. The fund invests in both bonds and loans, with the loans typically carrying a triple-A guarantee, such as Dutch export financing instruments.

The fund’s goal is to achieve an annual return of between 4% and 5%. Over the past five years, it has successfully delivered on that promise — an impressive feat, considering that rates were near zero in the first years before sharply rising later, both scenarios generally being unfavorable for bond investors.

"The fund’s goal is to achieve an annual return of between 4% and 5%"

Half the risk

To mitigate risks, the fund is broadly diversified across sectors, countries, and credit ratings to ensure a steady stream of interest income. The broader the diversification, the lower the volatility. The fund has an annual volatility of 2%, which is half of the benchmark’s 4%. The portfolio typically holds between 150 and 170 positions. Bonds denominated in currencies other than the euro are fully hedged to eliminate currency risk.

In other words, the fund offers investors low risk and consistent returns. Abma notes, “That’s exactly what many investors are looking for on the defensive side of their portfolios. We focus more on downside protection than on chasing upside — that’s the nature of fixed income investing.”

Strong outlook

With interest rates now higher and the yield curve steeper compared to a few years ago, the return prospects for the Fresh Fixed Income Fund have clearly improved. Bazuin points out that you can now buy bonds from very solid companies offering yields close to 4%. “That’s a big change from the years when interest rates were even negative,” he says.

Since extending the portfolio’s average maturity from half a year to around 3 to 3.5 years, positions are held longer, and the managers need to trade less frequently. The waters have calmed somewhat. That doesn’t mean there’s less work to do. “We continuously monitor our existing positions and stay alert for possible switch opportunities,” says Abma. “That’s also why we avoid holding too many illiquid bonds in the portfolio — we want to remain agile.”

No fear of recession

The return of Trump has stirred some turmoil in the markets, and fears of a U.S. recession have resurfaced. Yet Abma and Bazuin remain unfazed. “A recession is primarily a concern for equity investors — they’re the first to be impacted by an economic downturn. But the current credit spreads on bonds suggest that the market is not pricing in a recession,” Abma explains.

“A recession is primarily a concern for equity investors”

According to Abma, the fund’s outlook remains strong, and even further growth in assets under management won’t compromise returns. “The fund currently manages close to €100 million. We can easily grow to €500 million without making any compromises in our investment strategy.”

A fund for everyone

The Fresh Fixed Income Fund is an attractive choice for any defensive investor seeking stable income with low risk. The fund is accessible to retail investors starting from just €1, but it is also widely used by institutional investors such as insurers, foundations, and corporations.

According to Abma, the fund is particularly suitable for professional investors looking to outperform their benchmark for their clients. “Given the massive outperformance over the last five years, this fund is essentially impossible to ignore.”

The Fresh Fixed Income Fund by OHV is managed by Richard Abma (CFA, FRM, CAIA, CMT), Otto Bazuin (CFA), and Kors van der Werf (CFA, FRM). Richard Abma serves as OHV’s Chief Investment Officer and is also a portfolio manager for the fund. Otto Bazuin focuses on company analysis and operational management. Kors van der Werf, who was unfortunately unavailable during the interview, specializes in identifying opportunities in the high-yield market.

This year, the fund received double honors at the LSEG Lipper Fund Awards. It won in both the 3-year and 5-year performance categories. It also secured a LSEG Lipper Fund Award back in 2024.