We tend to have very little credit, in our multi-asset portfolios, and generally no sub-investment grade exposures. We want the asset classes to do what they are designed to do, namely to take our risk in growth assets like equities, and allowing our defensive assets to do just that, in fixed income, providing an offset (negative correlation) to equity market risk.
On a DAA basis we will allocate to investment grade credit when spreads are wide (and as of now, they are very, very tight) but the observation we wish to make here is about the High Yield pocket of fixed income.
Observe the performance over 2020, and how it compares to almost every other sub-sector/flavour of the fixed income universe.
Currently, with low yields across the board, there is the tendency to “reach” for yield, which we think is a temptation best resisted intra asset class, with a monotonic shuffling up the risk curve.
Instead, we prefer to let the asset class do what it is designed to do.
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This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
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