Opportunity: Credit investing
Capturing the rewards from credit
By all standards, we’ve seen a very significant repricing of fixed income markets, including the market in credits. The world looks grim, with economic growth weakening and inflation soaring. As central banks respond aggressively and rates move higher, volatility has been rising. But volatility creates plenty of opportunities – if you know what you’re doing.
The credit asset class offers investors a variety of options with attractive risk-return characteristics.
History shows us that over the long term, corporate bonds have provided diversification and helped to reduce portfolio volatility. This is because they can provide positive returns in years when equity markets decline.
Aside from the diversification benefits, credits also have income-generating ability and investors have historically allocated to this asset class to benefit accordingly. Income return is a substantial driver of longer-term bond returns. With yields now increasing, the ability to generate higher income in the future has increased substantially.
CIO High Yield
With the repricing of fixed income markets, corporate bond yields have risen sharply and may provide an attractive entry point.
Investing in credits means you’re getting exposure to the credit cycle. This describes recurring phases of easy and tight borrowing and lending in the economy. By understanding where we are in the credit cycle, the Robeco team can identify the best opportunities in the credit markets.
With the repricing of fixed income markets, corporate bond yields have risen sharply and now provide an attractive entry point from which to build back bond exposure in a portfolio.
Higher rates and credit spreads could enable investors to earn higher income in the coming years. With the economic outlook becoming more challenging, we think it's very likely that bonds could go back to being a hedge against equity market volatility. We therefore believe that investors should consider building back bond exposure.
The market cycle
Mapping our view on market segments
Source: Robeco, September 2022
We’ve been corporate bond investors since the 1970s and were one of the first European investors to launch a global high yield credit strategy. We’re also an industry leader in sustainable credits investing, with SDG and climate-focused credit strategies.
Our style is contrarian, value-focused and research-driven. The success of this style relies on our in-depth research capabilities. Robeco’s international team of analysts has the research skills, global sector expertise and sustainable investing knowledge necessary to help the portfolio managers to select the best opportunities.
Robeco has long been a leader in SI. Our rigorous sustainability checks and balances help us make better-informed investment decisions.
Robeco High Yield Bonds. Successful global high yield capability and track record since 1998. The strategy is known for its conservative and contrarian investment style with a structural underweight in CCC-rated issuers.
Robeco Global Credits. The strategy invests globally in investment grade corporates and financials and can invest outside of the standard index. Its strength is based on a truly global, contrarian and unconstrained attitude, and is driven by long and short opportunities rather than the benchmark
Sustainable solutions. We’ve also built on this approach by creating investment strategies that specifically target certain sustainability goals, such as RobecoSAM Global SDG Credits and RobecoSAM Climate Global Credits.