Global credit fundamentals remain supportive in 2020 with investors still searching for yield
Schroders awarded ‘Best Fund Provider – Global Bonds’i with flagship strategy - Schroder ISFii Global Credit Income, which continues to deliver stable income stream for investors as it celebrates its three-year anniversary
Bolstered by the dovish pivot by global central banks and the search for yield, global credit markets enjoyed a very strong year in 2019 in terms of total returns. Both investment grade and high yield markets notched double-digit gains. Looking forward to 2020, global credit could continue to generate modest returns, primarily from coupons, and provide a steady income stream for investors.
Demand for global credit is expected to remain strong. While off recent peaks, the market value of negative yielding debt is still at historic levels. This will effectively push investors to take more risk as they reach for yield. Lower rates and central bank balance sheet expansion will also compound this reach for yield, pushing investors into the higher yielding segments of global credit markets.
Schroder Investment Management launched the Schroder ISF Global Credit Income (the Fund) three years ago for the kind of market environment that we are currently experiencing and which will likely be with us for some time to come. It was launched as a solution for those investors in search of a stable income stream whilst also wanting to mitigate drawdown of capital relative to the broader credit markets during downturns.
As it celebrates the Fund’s third anniversary, Schroders is pleased to announce the strategy has surpassed AUM of USD 3 billion. Schroders has recently been awarded ‘Best Fund Provider – Global Bonds’ by Asian Private Banker, which recognises the Fund’s outstanding performance and asset-gathering success as well as the firm’s ability in servicing clients’ needs.
Patrick Vogel, Fund Manager and Head of European Credit, said: “Over the past three years, the Fund has been delivering the steady income stream and returns that investors have been looking for. During this period, the strategy has delivered a cumulative return of 18.4%iii. We have seen investor demand for the fund globally, but especially across Asia where it has become an important component of many individual investor’s portfolios.”
Schroders has an innovative quantitative asset allocation model and theme-based investment approach to credit selection that allows the Fund to identify idiosyncratic opportunities and risks from secular trends, such as macroeconomics, demographics, technology and consumer demand.
Vogel added: “In the current volatile environment, we believe a dynamic and unconstrained approach to capturing diverse income sources from across global credit markets is the way to go. The fund invests across 60 countries, 100 sectors and bonds of different credit quality.”
i Asian Private Banker Asset Management Awards for Excellence 2020, based on performance of Schroder Investment Management and Schroder ISF Global Credit Income from 1 January 2019 to 31 August 2019.
ii Schroder International Selection Fund is referred to Schroder ISF.
iii A Dis USD share class, Morningstar, NAV to NAV, net income reinvested, net of fees, as at 29 November 2019. Cumulative return since launch on 30/11/2016. Fund annualized return: 1 year – 10.45%, 2 year – 4.43%, 3 year – 5.79%. YTD return: 10.40%. Past performance is not a reliable indicator of future results, prices of fixed income securities and the income from them may fall as well as rise and investors may not get the amount originally invested. ©Morningstar 2019. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.