60 seconds on global credit: high yield vs investment grade

Manu George

Senior Investment Director, Fixed Income

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Schroders look to invest in the best possible market for investors. This means we are constantly looking out for the most attractive opportunities where there is yield.

High Yield vs. Investment Grade

However, when we talk about high yield, we are less excited about the high yield market. A slowing global economy will put pressure on the business profile of high yield, which tend to be much more levered or debt-driven companies. In an environment where the economy is slowing, companies with too much debt will struggle to pay off interest that they owe and loans that they have taken out.

We want to allocate more of our risk towards the investment grade space within advanced economies as opposed to high yield space. Once valuations retrace to a level that is suitably balanced in terms of potential investment returns versus the risk that the high yield market presents to us, then we will look to reengage in the high yield market.