Credit/Fixed Income

Playing Defense in a Low-Rate Environment

, | Download

Investors have predominantly relied on developed markets sovereign bonds for defense in balanced portfolios, but low rates have diminished their diversification characteristics. We find that a diversified basket of “defensive” assets has provided comparable diversification characteristics to developed markets sovereign bonds historically. While this basket may not solve all challenges associated with today’s low-rate environment, we view it as better equipped than developed markets sovereign bonds to defend balanced portfolios during future periods of equity market stress.

Review of Market Performance: Calendar Year 2020

, , , , , | Download

The onset of the COVID-19 pandemic caused steep declines in risk markets in first quarter 2020. Safe-haven assets, such as core sovereign bonds and gold, performed strongly during this period and have held on to much of their gains. Large-scale intervention by both monetary and fiscal authorities eventually put a floor under risk markets, driving rapid recoveries and pushing equity markets to new highs.

China’s Onshore Bond Market: An Update

, | Download

Interest in China’s onshore bond market has been rising steadily since 2016 when the market was thrown open to foreign investors. Foreign holdings of onshore bonds now exceed US$400 billion and are set to rise further. We think the market warrants further attention from global investors, given Chinese bonds continue to offer higher yields and lower correlations than those found in other major bond markets, with the potential to bring portfolio diversification benefits.

VantagePoint: Investment Opportunities Six Months Into the Pandemic

, , , , | VantagePoint Series | Download

Economic, market, and healthcare circumstances have been extraordinary over the last six months. However, attractive opportunities exist. We see appeal in tech and tech-enabled businesses but remain cautious on elevated pricing. There’s enough value in relatively cheap segments of public equities to justify taking measured, diversified overweights. We are broadly cautious on credit, but see pockets of opportunity in some segments less supported by central bank activity. Finally, the importance of investing in social equity and diversity has been brought into sharp relief by this crisis.