Chief investment officer, Hywin Wealth, London
‘One of the best opportunities within fixed income is the US high-yield market because it offers very attractive returns (approximately 6%) with contained duration risk.
‘We focus on commodity related companies, mainly within the energy and precious metals sectors, given their improved credit conditions.
‘The removal of near-term refinancing pressures through large dividend cuts, and substantial capex and opex reductions have enhanced these companies’ cash positions, and in turn spreads have narrowed.
‘On the other hand, we do not believe European high yields are compelling investments on a risk-adjusted basis. The excess liquidity generated by the ECB’s QE programme has kept yields artificially low in the sub-investment grade sector, underestimating the credit risk of most of these entities. Despite the rally and spread compression, we favour EM corporates both in hard and local currency as they still offer and interesting return profile (above 4%) in an improving macro environment.’