Sharing our convictions

Overall CLO and loan performance have exceeded our expectations, though there are still plenty of headwinds for the market, chief among which is the prospect of further lockdowns and more economic disruption as Europe battles a second wave of COVID-19 cases.

As sustainability-minded equity investors are looking beyond their home turf, the global importance of environmental, social and governance (ESG) standards is rising. But while their significance is relatively high in the “west”, emerging-markets companies have some catching up to, according to Lara Kesterton, Vontobel’s Head of mtx ESG Research.

After a perfect pandemic storm, the US Federal Reserve and other supertankers are filling their holds with strange cargo. This may seem like the age of indiscriminate buying – hardly a strategy many investors find alluring. Meanwhile, often-shunned merchandise from emerging markets may look promising to a discerning eye.

Is EM the next asset class to go passive? The answer is «no», according to Dr. Marc-André Göricke, Senior Consultant at alpha portfolio advisors. In this viewpoint, he provides empirical evidence on the benefits of an active approach for EM assets.

Overall, in our view there may be some temporary volatility ahead which investors can try to sidestep or even take advantage of, but it’s probably not worth trying to be too cute as our medium term outlook is still constructive.

This video explains how CLOs are structured, how the process works for investors and what protections are in place for bondholders.

This video explains how TwentyFour’s unique ESG integration process works, and how our purpose-built relative value tool, Observatory, allows our portfolio managers to monitor bond issuers’ ESG credentials on a daily basis.

The Bank’s ability to dampen market volatility has certainly been a comfort to fixed income investors; over the last month £ IG spreads have moved in a range of just 4bp and ended tighter than they started, which compares rather favourably to the 5% peak-to-trough swing in GBP-USD over the same period.

A cut by the Fed or the BoE from here would mean negative rates, while the ECB already has its deposit rate deeply negative at -0.5%.

As autumn approaches, Head of Corporate Bonds Mondher Bettaieb and Portfolio Manager Claudia Fontanive-Wyss believe developed market corporate credit is entering a sweet spot. In this Viewpoint, they explain why.

Why should investors care about ESG and why has the focus on ESG increased over the last several years? We believe the answer lies partly in the uncertain times in which we live. ESG shines a light on stability. It is not a luxury, but a critical part of risk management.

The US government launches 2 new rules aimed at ESG and proxy voting. Individually they appear investor-first, but taken together may be seen as a political agenda to limit investor activism from social and environmental interest groups. We are concerned about the impact on effective stewardship.