The UK corporate bond market has become more sophisticated in the last 12 months, according to Britannic Asset Management.
The company attributes this professionalism to the fact that institutional investors have demanded credit sensitive coupons and more stringent covenants on a number of new issues.
Commenting, investment manager David Roberts said: “Demand for corporate bonds remains extremely high, but with the economy slowing and a general move towards lower quality issuance still prevalent, detailed credit analysis is more important than ever before.”
Britannic found that in June 1999, the number of corporate bond funds on the market stood at 70, but by June this year this figure had increased to 137.
Roberts added: “Detailed credit analysis involves not just historic analysis but a careful assessment of future trends and confidence that a credit’s cashflow going forward will be sufficient to meet all necessary obligations.
“Many investment houses are relatively new to the market and may not have their own tried and tested in-house credit analysis systems. But there’s no doubt that the slowdown has quickened the pace of in-house expertise building up and the market has become more sophisticated.”
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