Fund man­ager in­sights

Finweek English Edition - - FUND IN FOCUS -

The man­date for the fund is in­vest­ment-grade bonds, ac­cord­ing to David Knee, one of the fund’s man­agers. The credit qual­ity of the fund is on av­er­age A, he said. A rank­ing of A- and higher by a credit rat­ing agency such as Moody’s In­vestor Ser­vice shows that there is a high prob­a­bil­ity that the is­suer of the bond would be able to re­pay its obli­ga­tions, in­clud­ing the cap­i­tal and in­ter­est.

“In the medium term we think these as­sets will per­form well,” Knee said. Cor­po­rate bonds tend to per­form poorly in an en­vi­ron­ment where in­ter­est rates are in­creased and a re­ces­sion­ary cy­cle kicks off, ac­cord­ing to him. He didn’t fore­see that hap­pen­ing at the mo­ment de­spite the global econ­omy en­dur­ing “head­winds” such as the slow­down in the Chi­nese econ­omy and lack­lus­tre growth in Europe.

“In re­cent years in­vestors have al­lo­cated a lot to cor­po­rate bond as­sets in the search for higher yield,” Knee said. Af­ter the fi­nan­cial cri­sis and sub­se­quent global re­ces­sion in 2008 and 2009, cen­tral banks across the world low­ered in­ter­est rates to his­tor­i­cal low lev­els in a bid to boost eco­nomic growth. In­vestors flocked to high-re­turn as­sets such as eq­uity in emerg­ing mar­kets and cor­po­rate bonds.

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