Global Corporate Bond: 10 years of Alpha generation

With global markets navigating a complex and evolving landscape and at a time when corporate bonds have emerged as a cornerstone for resilient and diversified portfolios, Vontobel is proud to celebrate a decade of alpha generation for the Vontobel Fund – Global Corporate Bond, which passed its 10th anniversary in October 2025.

With yields remaining near multi-year highs and credit fundamentals improving, we believe now is the time for investors to reassess the role of credit in their portfolios.

The stability of developed markets corporate bonds

Global corporate bonds, particularly investment-grade, have long been a reliable choice for investors seeking stability and income. Despite the persistence of tight credit spreads – unsurprising when considering overall yields – history shows these conditions can endure without undermining the asset class’s appeal.

In 2025 global investment-grade spreads have seen slight tightening, reflecting strong corporate fundamentals, including solid earnings, and improving credit profiles, accompanied by a wave of credit rating upgrades, particularly among BBB-rated companies.

What makes this environment particularly compelling is the level of yields on offer. Yield-to-maturity levels for US and European investment-grade corporate bonds are still substantially higher than they were at any point in time over the last 13 years. These elevated yields have historically served as a strong predictor of future returns and provide a consistent source of income through higher bond coupons.

For investors, the opportunity cost of remaining in cash or short-term instruments has grown significantly, making corporate bonds an attractive asset class for those seeking stable returns.

The role of active management in unlocking value

In global corporate bond markets, the ability to generate alpha hinges on active management and disciplined credit selection. While credit spreads remain tight, investor focus must shift to identifying improving credit stories and optimizing spreads across regions, countries, sectors and currencies. Taking a truly global perspective allows managers to compare issuers and segments across regions, ensuring portfolios are positioned to capture the best opportunities while striving for diversification.

Our approach focuses on individual credit selection rather than macro views over duration or sector and country. We believe this to be more repeatable and reliable over the long-term, providing investors with more predictable outcomes.

Conclusion: A timely opportunity

The current market environment presents a timely opportunity for investors to capitalize on the hidden power of corporate bonds which offer a stable and reliable source of income.

With yields at their highest levels in over a decade and solid credit fundamentals, we believe corporate bonds are well-positioned to deliver strong performance in the years ahead. For investors willing to adopt an active and disciplined approach, the alpha opportunity is significant.