The investment environment has changed dramatically since the beginning of 2022 with bond yields and inflation sitting at or near multi-year highs. Meanwhile, volatility and uncertainty about what comes next have also risen sharply. While 2023 looks to be year where bonds are back in fashion, investors now face a more nuanced economic environment. Fears of a recession and/or stagflation, are coupled with weekly macro-economic drama driven by geopolitical risks, climate change, stakeholder expectations, and fast-moving structural changes. Understanding these risks and having the experience to deal with these forces may be what sets investors apart and allow skillful active managers to navigate the volatile waters.
This year’s webinar series will focus on the complexities that continue to vex investors as they look to reposition their portfolios for this new environment. This webinar series will help you make sense of the current investment climate and better prepare you to make intelligent decisions for your portfolio. We will examine the realities of inflation, recession, defaults, liquidity and geopolitical risk and how they are impacting the global economy and altering the investment landscape.
Mark Dowding, Chief Investment Officer for the BlueBay Fixed Income team at RBC Global Asset Management will kick off the series with insights he has developed over his distinguished career and after meetings with some of the largest investors in the world. Subsequent episodes will then dig deeper into each of these topics to gain a better understanding of the risks and what management tactics are required to capture opportunities resulting from this environment.
Not all cash is created equal
Cash is often what’s left over after investment decisions have been made. For the past decade plus, rates were very low, and cash was the forgotten portion of a portfolio. However, the world has changed. While the current market environment can best be described as uncertain, interest rates are high and look to stay that way for some time to come. With investors pouring record sums of money into cash-related investments, they are now paying serious attention to their cash. Please join us for episode five of the webinar series on November 15, 2023 at 11am ET to discuss how to navigate these complicated times. The discussion with John Donohue, Head of Liquidity Management and RBC Banking Channel at RBC Global Asset Management, will tie in fresh perspectives related to liquidity markets. John has spent the majority of his career in the short duration fixed income space, holding leadership roles within both portfolio management and distribution, and joined RBC GAM in 2015.
- Investment options for cash have expanded beyond plain vanilla.
- Perfectly timing the market isn’t possible. It’s best to define a process and have discipline.
- Develop an Investment Policy Statement that is a living document.
- There are interesting opportunities to maximize return, while preserving capital in a risk averse way, including: treasuries, agencies, corporate bonds, commercial paper, and asset backed securities.
- Our overwhelming view is that rates are going to be higher for longer.
The risk/reward paradigm of US High Yield
While the economic outlook remains clouded, there are several factors that make US high yield bonds attractive, especially compared to private credit. The highest yields in over a decade, a lack of supply and strong demand, combined with solid overall credit fundamentals, may provide investors in high yield a cushion from the potential risks in an uncertain macro environment. Meanwhile, defaults on private debt have been running about twice that of public market bonds. For us, the choice is clear and we’ll go into details during episode four of the webinar series on September 13, 2023 at 11am ET with Andrzej Skiba, Head of US Fixed Income and BlueBay Senior PM at RBC Global Asset Management, who assumed his role ten years ago and brings twenty-two years of credit and portfolio management experience. Please join us and interact with Andrzej as he shares his insight on the current market environment and where we are finding the most attractive risk-adjusted opportunities.
- US high-yield bonds remain attractive compared to private credit.
- Private credit is plagued by a lack of transparency and a lack of liquidity.
- In an economic scenario where there's a fair amount of uncertainty, liquidity is very valuable.
- Companies using private credit are highly levered, which make them vulnerable to economic slowdown.
- The leverage within public debt space is running at the lowest since the global financial crisis.
- The wall of money pouring into private credit has watered down covenants and shrunk spreads.
Weighing the delicate balance of tailwinds and risks in Emerging Markets
As we look towards the rest of 2023, on the back of high volatility, there are several themes that point to a positive outlook. Through a combination of tailwinds, albeit balanced by some potential risks, geopolitics could surprise to the upside and have a positive impact on investors’ risk appetite. Meanwhile, central bank policy orthodoxy and the improvements of current account and fiscal balances could also start to provide support for emerging markets. Please join us for episode three of the webinar series on June 21, 2023 at 11am ET with Polina Kurdyavko, Head of Emerging Markets, BlueBay Fixed Income Team, who brings twenty-five years of emerging markets investing experience. Polina will provide insight on opportunities within emerging market debt against the current state of the geopolitical backdrop.
- Events affecting emerging markets have included geopolitics, continued fall-out from the pandemic and rising interest rates
- Two major tailwinds have been orthodox monetary policy and elevated commodity prices
- While the Russian conflict with Ukraine has been a serious headwind, we feel cautiously optimistic that it may be resolved sooner than most expect
- To tackle inflation, central banks in emerging markets have implemented an orthodox monetary policy
- Progress on restructurings could be a significant tailwind in the coming months
- Read Polina's article Discipline pays off: The new opportunities in Emerging Markets
- Subscribe and read Notes from the desk of Polina Kurdyavko
- Read Polina's article Capturing emerging market potential
Adventures in Multi-Asset Credit - Opportunities in a higher interest environment
In recent years, Multi-Asset Credit (MAC) has been a popular choice with investors due in part to the low yields offered in traditional credit markets. In today’s environment of higher interest rates, the flexibility inherent in MAC has taken on increased significance. Please join us for episode two of the webinar series on May 18, 2023 at 11am ET with Blair Reid, Senior Portfolio Manager, BlueBay Fixed Income Team. Interact with Blair as he shares his insight on the best risk-adjusted opportunities, the use of hedging tools, and ESG within MAC.
- A look at the current conditions in the bond market through the lens of a multi-asset credit manager
- Yields are high by historical standards, but spreads are not cheap
- Multi-asset credit offers flexibility in asset allocation, security selection and hedging
- We are finding the best risk adjusted opportunities in CoCos and EM local currency debt, while leveraged loans are less attractive
- ESG is a complicated topic and challenges remain as views on the topic have evolved
- Read Blair's article Adventures in Multi-Asset Credit Opportunities in a Higher Interest Environment: A Deep Dive
- Read Blair's article Why now is a good time for MAC
- Subscribe and read the Multi-Asset Decision Group's monthly update
A compass for today’s credit markets
Please join us for episode one of the webinar series on March 22, 2023 at 11am ET to discuss our insight on these complicated times. Passionate, insightful, contrarian at times and always a true thought-leader in his field, Chief Investment Officer Mark Dowding shares his views on the current state of global markets. Mark will draw from the insights he has developed over his distinguished career as a research analyst and portfolio manager as well as from the many in-depth and detailed conversations had with some of the largest investors in the world. Interact with Mark as he provides insight on his expectations for 2023 and beyond.
- Economies have proven resilient in the face of stubborn inflation, rising rates and market volatility
- Banks are much more stringently regulated and in stronger financial position than in 2008
- Inflation moving forward will be higher than our recent experience, however
- Investors are no longer required to look to private markets for yield
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