Fraser Lundie, co-head of credit at Hermes Investment Management, observes: “After a strong period for global credit returns, the scope for higher-risk companies to rally much further has diminished.
“We believe that interest rate volatility and the gradual winding down of quantitative easing programmes will introduce some hesitation into the credit markets but there is no shortage of opportunities within global credit, such as high-quality cyclicals and US retail.”
A diversified portfolio can be a suitable way for both first-time investors and those with years of investment experience to allocate to bond markets and help protect on the downside.
As Salman Ahmed, chief investment strategist at Lombard Odier, reiterates: “One should diversify across countries, as opposed to within countries, as monetary policy, and therefore the behavior of risk-free rates, is diverging.
“In addition, we would reiterate that diversifying across different sources of risk – credit risk, interest rate risk, illiquidity risk and alternative risks, such as those accessible through insurance-linked securities – is critical.”
eleanor.duncan@ft.com
