As pension funds and insurers hunt for yield away from equity markets, against a backdrop of uncertainty caused by rising inflation and the war in Ukraine, CAMRADATA’s latest whitepaper on High Yield asks how bond investors make selections given current and long-term pressures.
This latest whitepaper offers insights from firms including Credit Suisse Asset Management, T.Rowe Price, bfinance, Scottish Widows, Secor Asset Management and WTW who attended a roundtable hosted by CAMRADATA in London in May.
The report highlights that credit is no longer cheap. For example, for a typical BBB company in the U.S., the cost is about 220bps higher than a year ago. Panellists also shared their views on whether the era of ‘lower for longer’ is now over, before discussing recent search activity for credit mandates.
The report also looks at how to access the High Yield market, how quickly rates will rise and the differences between regions, with the European market highlighted as being comprised of higher-rated and better quality issuers which could allow investors to harness capital gains as the market recovers.
The report explores the risks and opportunities of ESG issues, as analysts increasingly looked to identify those companies trying to make a difference.
Natasha Silva, Managing Director, Client Relations, CAMRADATA said, “In spite of the current market uncertainty, long-term asset owners are not yet ready to lock in negative returns from traditionally safe players such as sovereigns. Below investment-grade credit, however, it is a moot point whether Leveraged Loans are structurally more attractive now than High Yield.
“Going forward, rate rises put pressure on bad credit, however it is structured. As well as the complex economic environment, with many factors way beyond creditors’ control, another potential friction point is the energy policy of nations in response to the war in Ukraine against their longer-term commitment to decarbonisation. With all this volatility in the world our latest whitepaper explores where bond investors might find yield with our panel of experts sharing their insight.”
To read the High Yield whitepaper, please click here.
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