At a time when investors are dumping long-term debt, one fund manager isn't only going the other way — he's actively hunting for the most beaten-down of the bunch. Nicolo Bocchin, global co-head of fixed income at Azimut Group, runs a niche fund investing almost exclusively in debt that doesn't mature in decades and pays little or no interest, the kind sold in the zero-rate era spanning the depths of the financial crisis through the end of the Covid pandemic.

Think Japanese government bonds that pay a scant 0.5% annually, or German bunds due in 2050 that don't pay interest at all. Now considered relics, these bonds are trading at deep discounts, mostly around 50 cents on the dollar. Aggressive post-pandemic interest-rate increases and the subsequent rise in long-term yields have combined to dent this crop of debt, and the recent bond slump — fueled by inflation worries and simmering fiscal concerns — has only sent them lower.

For Bocchin, it's an opportunity. "This is a nice environment where you can capture these longer bonds, but at the same time pay very low amounts," Dubai-based Bocchin said. It's all part of a contrarian strategy at the €158 billion ($183 billion) asset-management firm, with the potential for a sizable payoff. But with yields on the rise, there are big market risks to match.

So far, the €137 million AZ Bond Value Fund has been a money-loser, declining more than 9% in euro terms since its inception in September 2025, eclipsing losses in the broader market. Bocchin remains patient, betting that some forces pushing long-term yields higher will prove temporary.