Fixed income offering ‘no place to hide’ for Payden & Rygel
There is “no place to hide” in fixed income in the event of a liquidity crisis, according to US-based investment manager Payden & Rygel.
The US bond specialist said it had opted to go into government bonds this year in light of the market downturn caused by the COVID-19 pandemic but that was not a solution for the fund in the long term. The yield on US 10-year Treasuries was currently 0.93%.
Portfolio manager Eric Sounders said in a webcast: “There is no place to hide in fixed income when weird things are happening with liquidity. The only thing that did well was long-dated government bonds but this is not a prudent strategy in the long term.
“The people who are going into government bonds need to realise that this is not good in the long term.”
The GSFM Payden Global Income Opportunities fund had 65% invested in investment grade and 8% in high yield as Sounders said he was cautious about parts of the high yield market that had been affected by COVID-19. Around 30% of the portfolio was invested in BBB-rated assets while 20% was in AAA ones.
In its latest factsheet, it said: “The strategy maintains a preference toward securitised product versus corporate credit in COVID resilient industries and remains cautiously optimistic in areas like high-yield corporates, bank loans, and commercial real estate, as default risk is still elevated.
“The strategy’s participation within the corporate credit market remained thin, while we continued to prefer securitised product given the strength in US housing, low rate environment, and lesser virus or election-related headline risk.”
The fund had lost 0.22% over one year to 30 November, 2020, according to FE Analytics, versus returns of 3.8% by the Australian Core Strategies absolute return sector.
AUTHOR
Laura Dew
Recommended for you
Global asset manager BlackRock has identified bringing private markets to the wealth channel as a key business area for the firm that could generate US$500 million in revenue in the future.
Flows into cash and fixed income ETFs soared in May, rising from $366 million in April to more than $1.3 billion, data from Betashares shows.
Quinbrook Infrastructure Partners has promoted its Australian head to the role of chief executive of the global investment manager.
UK-based fund manager Royal London Asset Management has appointed a Sydney-based head of regional sales as it embarks on a multiyear plan to expand its presence internationally.
