GLOBAL - Corporate bond investors are being urged to opt for individual security selection to increase portfolio returns.
Schroders Investment Management says there is only a modest opportunity for top-down bond investors due to the prospect of a strong US economy, which will flow through to the eurozone and Asian markets.
The fund manager claims individual security selection, rather than market or sector plays, is the best way forward due to the likelihood of further bad news from the market.
Head of global credit research John Davies said the firm would make “excess returns” for its clients this year by investing in credits that have not yet been affected by market tightening or where fundamentals are expected to outperform others in the market.
He said: “Equally important will be identifying those credits which have been excessively rewarded over the past year by the general market tightening, but whose fundamentals will not catch up to the rosy picture envisioned by current spreads.”
Schroders credit analysts and portfolio managers would look for opportunity in several types of credits.
Davies added: “Entering the year, we are favourably disposed toward European banks and telecommunications, Japanese maritime transport companies and the following North American sectors: basic industries, energy, manufacturing and services, electric utilities and railroads.”
The firm remained cautious on Japanese banks, telecommunications, non-sea transportation, Asian banks and conglomerates, Hong Kong property firms, North American automotive and UK power utilities.
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