Bonds: Piling into capital markets
There is a lack of sufficient issuance to meet investor demand as balanced and hedge fund managers enter the fray
We are approaching the 10th anniversary of the collapse of Lehman Brothers in New York and the trough of the global financial crisis. It was a point when corporate and parastatal bonds or credits couldn’t be given away. But it was also a good point to climb into the credit market. Victor Mphaphuli, manager of the Stanlib Flexible Income Fund, says investing in credit is now one of the key techniques of fixed income investing. In SA there are few pure credit investment vehicles, but institutional investors in the Investec Credit Opportunities Strategy will be smiling. There has been a total return of 11.7% a year, a 5.1% premium on three-month cash rates. Fund manager Simon Howie says that 10 years ago spreads, or the extra yield compared with money market rates, averaged 7%. This has narrowed to 4.2% in SA. It is not for everyone, as just 10.5% of the fund is exposed to AAA paper and about 30% to BB+ or lower, or subinvestment grade, sometimes called junk status. With new issues of ...
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