In the Conversations piece, Barings’ Sean Feeley and Chris Sawyer discuss the potential benefits of a global approach to high yield.
The global high yield market has grown steadily over the past decade, offering active managers an increasingly broad opportunity set from which to seek relative value. In recent years, interest in the asset class has been driven in part by investors seeking higher yields and returns amid a prolonged period of low interest rates around the globe. But the interest rate landscape is changing, and as investors look ahead to diverging monetary policies many are questioning how high yield bonds will factor into their portfolio allocations.
Historically, the asset class has delivered attractive returns through varying economic and interest rate cycles, presenting opportunities for active, experienced managers to add risk when appropriate returns are available and limit risk when conditions are unfavorable. From a relative value perspective, we see potential benefits for investors willing to diversify their exposure to Europe—a higher quality and lower duration market than the U.S.
How can taking a global approach to high yield investing—versus U.S.-only—benefit investors?
Sean: In our view, the overarching benefit of a global strategy is that it can give investors access to a much wider and more diverse universe of credits than a U.S.-only strategy. At Barings, our global high yield strategy isn’t limited to one market—we build our global portfolio out of our best ideas across the U.S. and Europe.