Maintaining flexible, long/short exposures across the credit markets, and limiting duration risk is the best way forward investors in today’s challenging fixed income markets, says Charmaine Chin, managing director and head of credit, relative value and event-driven strategies at K2 Advisors, part of Franklin Templeton Investments, in the article below.
It has been a consensus trade for yield hunters this year: buying emerging market debt. A net €54bn has already flown into the asset class this year. This contrasts with recent outflows from high-yield bond funds.
Bond funds domiciled in Europe saw net inflows of €29bn in June, the second-highest monthly tally ever, according to Morningstar data. Total inflows for bond funds rose to €52.2bn in the first six months of the year, a new high for semi-annual net inflows into the asset class.
Assets invested in illiquid credit more than doubled in 2016 from $178bn to $360bn, according to a survey by investment consultancy Willis Towers Watson.
New research from Hermes Investment Management shows a correlation between companies’ ESG scores and credit spreads.
Investors in Finland have increased their allocations to emerging market debt and high-yield bonds in an effort to maintain yields. Though spreads have compressed below their long-term average, they feel forced to maintain, or even increase their allocations.
Record-low bond yields have sent both institutional and retail investors in search of alternative credit options for their portfolios. They have tried absolute return funds, mainly with underwhelming results. Some are therefore proving their luck elsewhere in the fixed income spectrum.
In part two of a video interview, Morten Christensen, investment management director at Aars family office in Oslo, explains why he has a preference to invest in loans issued by large companies.
The historic way of dividing the world into developed and emerging markets is no longer an adequate way of assessing risk. Our unique approach to country selection helps us avoid the pitfalls of an antiquated approach
Investors should take into account the possible risks associated with investing in European bond funds, regulators say.
