Fixed income experts analyse the opportunities away from government and corporate bonds
JENNIFER HILL, 24 June 2021, Citywire Wealth Manager Magazine issue 558
A Treasury sell-off at the beginning of 2021 provided a brief hint that more historically normal yields were on their way. That has faded in recent months as prices once again neared pre-pandemic highs.
Last week, investors parked a record-breaking $756bn (£545bn) on deposit with the Federal Reserve after it started paying interest in an attempt to avert the threat of negative USD yields.
Following the rollercoaster ride of the last 15 months, wealth managers once again find themselves facing a familiar challenge: how to find adequate yield for income-seeking clients while staying within their risk budgets.
‘There are plenty of vehicles out there that wealth managers can allocate to simply to boost income, including equities,’ said Richard Garland, a portfolio manager at Berenberg. ‘The main problem they’re facing in this low-yield environment isn’t so much finding yield, but rather finding asset-level diversification which also has a yield.’
Fund houses have responded to this demand over the past decade by widening their product ranges. But innovation has come with inevitable high-profile failures.
‘A number of funds launched with great fanfare, such as [peer-to-peer investor] P2P and [secured lender] SQN Asset Finance Income, stumbled and have since disappeared,’ said James Carthew, head of investment company research at QuotedData. Both crumpled under the burden of bad debts.
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