Credit Attractive Source Of Returns – Pictet AM

Amanda Cheesley Deputy Editor 15 April 2024

Credit Attractive Source Of Returns – Pictet AM

Pictet Asset Management, part of Swiss private bank Pictet, discusses the outlook for fixed income at a media roundtable this month.

Credit has returned as an attractive source of risk-adjusted returns, according to Jon Mawby, co-head absolute and total return credit, at Pictet Asset Management.

This was discussed at a fixed income roundtable this month. Mawby explained how the volatility in government bond and credit markets can offer careful investors opportunities. He believes in a contrarian and value-driven approach, saying it is vital to protect capital and produce reasonable risk-adjusted returns, in order to take advantage of volatility rather than be captive to it.

Mawby thinks that more innovative methods need to be used to produce a credit portfolio that has lower correlation to risk assets. “We have to be more strategic. There is a lot of fear in fixed income markets,” he said.

Mawby also highlighted how the US Federal Reserve needs to cut interest rates sooner rather than later in the run up to the US elections, before its too late. He also believes that the Bank of England needs to cut rates to stimulate growth before the UK elections later this year.

UBS Global Wealth Management also emphasised on Friday how worries that US rates will stay higher for longer remained the main theme in markets, despite more muted producer price data. In UBS GWM's view, the recent strength of inflation and labour market data will make it hard for the Fed to cut rates until September. But the firm believes that the backdrop for quality bonds and quality equities remains positive.

Mawby co-manages the Luxembourg-domiciled Pictet-Strategic Credit fund which aims to gain exposure to a range of bonds, including corporate, government bonds and convertible bonds, as well as money market instruments. It invests worldwide, including in emerging markets and mainland China, and can invest across any sector and credit quality.

Mary-Therese Barton, chief investment officer of fixed income at Pictet AM, highlighted how the firm is building its presence in Asia. Last year, the firm launched Pictet-China Environmental Opportunities, a concentrated active equity fund investing in Chinese environmental solutions providers. It seeks capital growth by investing in Chinese companies operating in five environmental segments: renewable energy; green transport; industrial decarbonisation; resource efficiency; and environmental protection.

It is offered as a Luxembourg-domiciled UCITS fund, registered for sale in Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Portugal, Singapore (accredited investors only), Spain, Sweden, Switzerland and the UK. See more here. 

However, Barton underlined at the roundtable that developed markets are still crowding out emerging markets, due to macro-economic and geopolitical risks. She believes that there is a strong case to be made for emerging markets in the longer-term.

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