The market practice of ‘segmentation’ – where investors allocate money to specific asset class segments such as investment grade or high yield bonds – has been commonplace over the years. But this sort of ‘silo-thinking’ remains an inflexible approach.
Allocating instead on a more diversified and global basis can serve the same purpose while achieving higher risk-adjusted returns.
Such flexibility is increasingly useful as central bank policies are desynchronized and as different credit markets reprice because their economies are recovering at different rates. Instead of deciding to allocate certain monies to the high yield ‘bucket’ and other funds to investment grade, while likewise picking one region over another, it can be more useful to cover all segments in one strategy.
Robeco’s new Global Credits fund offers such a ‘one-stop shopping’ capability. The strategy has global investment grade corporate bonds as its key building block. In addition, the fund invests in the best-of-class credits across all segments regardless of type or location. Such a pooled approach mixes different types of security to maximize rewards while adequately assessing the relevant risks. This makes it possible to mix standard corporate bonds with secured bonds, high yield or emerging market debt on a global basis according to where the best opportunities lie.