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60 seconds on global credits: high yield vs investment grade

Manu George

Senior Investment Director, Fixed Income

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Schroders looks to invest in the best possible market for investors, which means we look for the most attractive opportunities whether it is yield, but also bearing in mind that we want to minimize volatility and give a stable and more deterministic income for our clients.

For the perspective of high yield, we are less excited about the high yield market, driven by a couple of factors. One being the more obvious factor, slowing global economy will put pressure on the business profile of high yield, which tend to be much more levered or debt-driven companies. And in the environment where the economy is slowing, those companies with too much debt will struggle to pay off the interest that they owe and the loans they have taken out.

So for us, we want to be allocating our risk more towards the investment grade space within advanced economies than the high yield space at this point in time. Once valuations retrace to a level that we feel compensates us for the risk that the high yield market represents, then we will look to reengage again in the high yield market.


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