In investing, where trends can shift rapidly and market conditions are ever-changing, the allure of fixed income was that it did what it said on the tin: stable and reliable returns. The global financial crisis (GFC), however, saw a transformation of the landscape marked by falling and persistently low interest rates and, subsequently, yields. Suddenly fixed income wasn’t so reliable. But with that movement in reverse, we believe bonds could be a safer bet than equities over the next few years.
At a glance
- The extended period of low and near-zero interest rates from 2009 onwards saw European High Yield bond yields follow suit, reaching sub 3%
- But the subsequent move higher caught many investors unawares/off-guard, re-emphasising that volatility is often relatively short lived and the importance of watching longer-term trends
- With yields having become more attractive and volatility creating opportunities for active management, we believe current market conditions are a compelling opportunity for investors to reconsider their fixed income allocations
The high yield universe
High yield as an asset class in European capital markets is around 25 years old. In some circles it might still be considered a bit of a marginal asset class – despite seeing more than two decades of sustained growth. Today in high yield, many of the companies generate at least €100 million in earnings and bring tranche sizes to the market of at least €500 million per bond (€250 million is the minimum size to qualify for the market). They include household names such as M&S, Avis, Land Rover, Asda and Virgin Media.
You can now read the full whitepaper at the link below
