Fixed income

We think it is indeed time to begin the search for recovery stories and deleveraging credits in sectors where the execution strategy is likely to succeed.

I think it’s likely we’ll see new cycle tights for the European CLO sector this year, so in addition to healthy income we believe there is plenty of room for capital appreciation as prices are being pushed higher in the secondary market.

We think this current pause in the global rally is healthy and gives investors a rare moment to reassess, but from a fixed income credit point of view we would not expect too much of a dip.

European ABS primary markets have started 2021 at the solid pace that most market participants expected. The market saw a patchy Q4 in which activity petered out early, not helped by the dominant UK market suffering some hesitation whilst tightrope Brexit deal talks went to the wire, but also as a result of a rather more simple fatigue that appeared to have set in.

In our view the rationale for the premium is certainly weakening and, of course, we can no longer call it a ‘Brexit’ premium.

TwentyFour AM partner and portfolio manager Chris Bowie looks back at investment grade credit market performance in 2020 and provides his outlook for 2021