Sharing our convictions

Despite the impressive returns of Euro HY over the last year or so, the backdrop for the asset class continues to suggest there is more upside to come.

This supply surge can be very welcome for those investors with cash to put to work, though it is also eyed with caution.

For bond investors, evidence of rising inflation represents the most resonant market story of 2021. In in his latest article Mark Holman, CEO of TwentyFour Asset Management (a boutique of Vontobel Asset Management), outlines the considerations for bond investors as they navigate credit market during the remainder of 2021.

To many, investing in sustainability is commonsense. To some, it is more of a bureaucratic waste of time with onerous new regulations. To us, it is clear that ESG is an integral part of evaluating business quality because, simply put, sustainability has a material impact on long-term value.

The U.S. Federal Reserve’s annual summer symposium in Wyoming represents an important data point for financial markets since it provides valuable clues as to the policy moves the Fed may make in the ensuing twelve months. This year will be no exception and the investor community should listen carefully. It usually chooses not to resulting not only in market volatility but also opportunities.

As the Delta variant establishes a hold in many countries, forcing some governments to re-assess reopening policies, the market is beginning to feel its impact. The implication on growth remains unclear, but early indications suggest the growth rate may have peaked for this year, albeit continuing its recovery.

Last week, Morgan Stanley successfully brought the first public German Multifamily CMBS deal (HAUS - Eloc 39) to market since 2013. Despite coming to the market in the middle of the summer, the deal has attracted strong demand across the capital stack.

Recently Chinese regulators have become more assertive, causing concern among the international investor community. The key in helping investors navigate and, hopefully profit from these changes, is to understand the bigger picture and what the government is ultimately trying to achieve.

When combined with other prevalent market dynamics, the favourable ratings trend paves the way for a highly supportive fundamental terrain as we advance through the cycle and one that is ideal for portfolio managers selecting credits.

We can model all kinds of credit risk as long as there is enough protection in the structure for investors to get comfortable with a degree of residual value risk.

After a hectic first half of the year, most investors, including us, were hoping for a dull summer to recharge our batteries, but it seems there’s no respite from the CLO machine.

As many of you know, with the roots of our business firmly embedded in the European ABS market, we have long sought to dispel the myths surrounding our market by explaining its underlying mechanics and how investors can fully exploit its unique properties.  

The Chinese government has recently instigated a far-reaching crackdown on privately-owned businesses in China. Chinese shares listed on foreign exchanges have reacted more negatively than A-shares to this increased government intervention. What risks does this pose to foreign investors and how can they prudently navigate the equity markets of China and Hong Kong?

It is quite rare that we recommend playing in the very bottom of the credit spectrum because CCC rated bonds are where at least 95% of all defaults come from, and are significantly more volatile than we would like.

We agree that banks are sitting with an abundance of excess capital and will use some of it to repay shareholder support. However, capital buffers will remain elevated for some time to come,

If we suppose a bond investor views an upcoming event as a potential threat to their positioning, they may attempt to hedge their portfolio with another position. The event passes, and the hedge works, but to the investor maintaining the hedge seems like a good idea in the aftermath. Do you maintain the position or remove it?

So far, lockdown restrictions have suppressed each wave of the virus; will the competent authorities have the conviction to see this latest wave through without erring on the side of caution once again?

Whether the Bank of England halts all purchases in August or merely begins to slow the pace of purchasing later in Q4 this year, by 2022, less technical support will exist for gilts.

TwentyFour's CEO, Mark Holman, discusses market conditions in Q2 2021 and provides his outlook for the year ahead.

TwentyFour Partner and Portfolio Manager, Gordon Shannon, discusses how the short term bond strategy has performed in Q2 2021 and provides his outlook for the upcoming months.

TwentyFour Partner and Portfolio Manager, Douglas Charleston, explains how ABS markets have performed in Q2 2021 and provides his outlook for the year ahead.

According to Mark Holman, CEO at TwentyFour Asset Management (a boutique of Vontobel Asset Management), he is currently spending at least 40% of his time talking about inflation, or more accurately, why the US Federal Reserve seems to have a different view of inflation to almost everybody else.

Based on these metrics, the picture seems rosy, and credit performance looks set to continue through the second half of the year should the main drivers of the recovery remain intact.

After a hawkish turn from the Fed at its June policy meeting, the response in US Treasury markets has confounded market participants and intensified the debate over ‘transitory’ inflation.