Henderson Global Investors explains its themes at Lausanne Summit
InvestmentEurope’s recent Lausanne Summit saw ten management groups outline their unique investment ideas, including Henderson Global Investors
Henderson’s nimble HY bond fund
In a crowded market displaying low spreads and an unwillingness by bank market makers to take bonds onto their books, it is useful and important for fund managers to remain nimble.
This will be one of the advantages for Henderson’s Horizon Euro High Yield Bond Fund, launching in November, says Henderson’s head of credit Stephen Thariyan.
Excessive size can be a disadvantage. “Some [credit] funds are €5bn or €8bn – which means a 1% position is €50m to €80m, and you cannot trade that. If one day you suddenly decide you do not like for example Peugeot, and want to trade a large position, you’re stuck.”
Banks, which historically took sellers’ orders onto their own books to find a buyer, have cut their dealer inventory by 80% over four years, according to data from Bloomberg of US primary dealer corporate bond position volumes in September.
Even before it debuts, Thariyan foresees capping the new fund at below €2bn, “which is the only way you can be sure to consider the alpha”.
He acknowledged that some investors ask him if the game is over for credit. “The amount of money coming into credit funds has been phenomenal and it will not stop. People want to own yield, so they are going towards high yield and emerging markets debt,” Thariyan said. “But we have not got to the point yet where we have run out of juice in the credit markets.
There are concerns credit has moved too far and that you could lose money going forward, but if you are active and flexible, I would argue that the opportunities are still there.”
The 12 months speculative grade default rate now is about 3%, according to Moody’s, compared to about 14% back in 2009, and Thariyan said rates “are expected to remain below average for at least the next one or two years”.
Investors in Henderson’s existing Horizon European Corporate Bond Fund have enjoyed about 28% total returns between its launch in December 2009 and September, for example, ranking the portfolio second in the Morningstar Fixed Income Euro-Corporate universe over the period.
For full details on InvestmentEurope‘s Fund Selector Summit click here: