Multi-Asset-Investing in einem Fixed-Income-Umfeld niedriger und negativer Renditen

Multi-Asset-Investing in einem Fixed-Income-Umfeld niedriger und negativer Renditen

As a multi-asset investor, we believe in the risk-mitigating effect of diversifying investments that correlate only slightly. While diversification always proves to be an attractive investment strategy, the relative attractiveness of individual asset classes varies over time.

As economic cycles continue to advance, escalating global trade disputes are putting additional downward pressure on the already dwindling global economy. As a result, investors have been investing in “safe haven” assets, as evidenced by the sharp fall in bond yields: currently around 15 trillion US dollars of bonds are traded worldwide with negative yields, with European and Japanese government bonds making up the majority.

27% of global bonds have negative returns on $, in bio.

Source: Bloomberg Finance LP, DB Global Research. 

Obviously, the extremely loose monetary policy and the historically low interest rates will continue even after a decade, at least for another year. On the one hand, central banks distort valuations, on the other hand, they push ahead with the relentless search for yield – a rare and valuable commodity today.

This also applies to the Diversified Monthly Income Strategy, which pursues two goals: the medium-term generation of strong capital growth with significantly lower volatility than equities, and the continuous fulfillment of an annual earnings target of 5%.

As interest rates in the developed world fall to ever deeper and more negative values, duration or interest-rate exposures play a key role in selecting fixed income securities within the fund. In our view, developed-market government bonds offer little value in terms of their current levels, either in themselves or as hedges in a risk-averse environment. This view is based on our assumption that current market returns are not in line with the fundamental situation: the macro environment is stabilizing, while inflation and growth are likely to be at a low level without a global recession.

In Fixed Income, we currently favor corporate bond investments and see carry rather than spread narrowing as the key driver of returns. Despite the weak performance of the risk markets in August, both high yield and investment grade securities remain expensive. Moderate global growth in an already advanced cycle is outweighed in these areas by a favorable technical backdrop and predominantly supportive fundamentals (idiosyncratic risks are increasing, but default forecasts remain manageable). Nevertheless, such engagements are very well thought-out and we therefore concentrate fully on quality. In other words, we focus on investing in sound companies with sustainable income streams and robust balance sheets.

We have focused our portfolio on selected segments that offer value potential on a relative basis. Our focus continues to be on relatively short duration investments that are less prone to interest rate volatility. At the moment, “Quality BB and B borrowers” appear most promising in the high yield area. In the IG area, we believe BBB-rated stocks offer relative value opportunities as market participants continue to shy away from feared downgrades in this area. We hold no positions in CCC-rated papers and only occasionally make exposure to sectors with structural problems, as we believe there is still a risk of being penalized by the market for excessive credit risk.

Our benchmark independent and unrestricted approach allows us to invest in a very broad investment spectrum. We have long favored subordinated financial debt and welcome the regulatory requirements that have led banks to fundamentally restructure their balance sheets since the global financial crisis. In this context, we also keep in mind the continuing pressure on the profit and loss accounts of these creditors, given the current interest rate environment.

Of course, at MAG we do not just look at credit markets relative to government bonds. Our asset allocation is driven by our expectations regarding the total return and the risks of the respective asset classes and their attractiveness relative to all other asset classes, including more specific credit classes, equities and alternative investments.

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