Bonds – Credit: Fixed income still has an important role to play in portfolios

We believe Fixed Income still has a role to play in client portfolios. Credit as a component of the Fixed Income asset class also has an important role to play given its depth and breadth across different geographies, risk spectrums, capital structure and different maturities. Credit provides investors with a source of income from corporate cash flows which are senior to equity. Credit is also before equity in accessing company assets in the case of distress. Exposure to different segments of the credit asset class does however need to be actively managed as you don't necessarily want to hold the entire spectrum at all points of the cycle. Currently investment grade credit valuations have rebuilt and investors are still being compensated for default risk and the current point of the economic cycle should be constructive for credit. The rebuild in high yield and hybrid spreads has made us more positive on these segments. In terms of emerging markets we remain cautious and continue to avoid exposure in these markets. You can read further at “Fund Focus: Credit Securities” (VIEW LINK)