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The report also reviews the negative-yielding debt landscape in the investable fixed-income market in detail and asserts that asset managers need to consider certain strategies, including: taking advantage of their global footprint, adopting a nimble approach, and demonstrating acumen across a wide range of less traditional and fundamentally active strategies to help generate positive returns.
According to
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For detailed views on
It takes more to generate positive returns in the era of negative-yielding debt
Negative-yielding debt represents a sea of change in the investable fixed-income market, creating undesirable knock-on effects for investors, banks, and policymakers alike. "We have now officially entered an alternate fixed-income reality," said
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1 "Regional Economic Outlook: Stunted by Uncertainty," |
Beyond policy rates, ongoing quantitative easing by central banks is driving the prices of longer-dated bonds and pushing down yields. Moreover, investors' demand for income is bidding up bond prices as well.
"A stunning 22% of the Bloomberg Barclays Global Aggregate Bond Index carried a negative yield in November. This was led by the index's sovereign allocation, of which 31% was negative yielding.2 Investors should expect low-to-negative rates to persist for some time, though," continued
"The lower-for-longer scenario may persist, as inflation rates remain stubbornly below policy targets across many developed markets, with massive debt burdens, globalization, aging demographics, and technology-related price deflation all applying downward pressure. Fixed-income managers will require more tools at their disposal in generating income."
A global research footprint will be crucial in finding opportunities in the era of negative yields. A global network with local teams in market, capturing development firsthand and in real time, will lead to better decision-making and more effective risk management. Finally, a capital structure agnostic view, an openness to high yield underpinned by strong fundamental research capabilities, and a readiness to take advantage of emerging-market debts and preferred securities are possible ways of finding income.
For detailed views on fixed-income challenges and opportunities, click here.
Strong ESG opportunities for active
As environmental, social, and governance (ESG) trends are changing companies' business models and regulators are pushing investors to think through issues such as the impact climate risk has on their portfolios, bondholders are becoming more vigilant in accurately measuring and managing these implications.
"Market interest in sustainable investment in
However, despite the improvement in corporate disclosure on ESG issues in
"Against a backdrop of sometimes conflicting and evolving paradigms for issuing and investing sustainably in Asian assets, stakeholders must conduct careful and collaborative due diligence to avoid muddled results," added
Detailed viewpoints on ways to identify sustainable investment opportunities in the Asian fixed-income space, and case studies from
Other key takeaways from the Global Intelligence report
- "Pursuing alpha: private equity opportunities in the decade ahead"—Private equity capital has become a more prominent source for financing global commercial enterprises, as returns on that capital are less tied to beta than those from public markets. This report, looks at five ways in which private equity investing can continue to play a positive role in the years ahead.
- "Finding value in a late-cycle economy"—With markets now in late-cycle territory, stock price volatility has become a greater challenge for investors. But by solely focusing on short-term stock price movements, investors risk missing out on longer-term value creation opportunities. This report, gives investors a clearer picture of where business value can be generated.
- "The OCIO checklist manifesto"—The outsourced chief investment officer (OCIO) fiduciary model is gaining traction among pension plan sponsors and other institutional investors, as worldwide OCIO assets under management grew to over
$1.5 trillion in 2017, up more than 14% from the prior year.4 This report, spells out six outsourcing considerations for pension plan sponsors.
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2 Bloomberg, 3 4 " |
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