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THE INVESTOR CENTRE
All information correct as at 30 June 2016
INVESCO PERPETUAL
Joint manager: Multi Asset
Portfolio focuses on well-established,
high-yield bonds at low risk of default
Risk-aversionwas the
dominant sentiment
at start of the year
David Millar, Dave Jubb and
Richard Batty
EDGEPOINT
Satellite manager: Global Equity
Market volatility presents investment
opportunities for portfolio
No shortage of
potential headwinds
facing globalmarkets
Tye Bousada and Geoff MacDonald
INVESCO PERPETUAL
Corporate Bond
Volatility provides opportunity to
purchase quality bonds at good price
European corporate
bond insurance soars
following referendum
T he positive sentiment generated
by the European Central
Bank’s Corporate Sector Purchase
Programme (CSPP) continued to
in uence corporate bond markets
over the period.There was also
signi cant in uence on bond market
prices from the UK’s referendum on
membership of the EU.
Bonds that were expected to be
included in the CSPP rallied strongly,
with euro investment grade corporate
bond yields falling below 1%.This led
to high-yield bonds,widely expected
not to be included in the programme,
also to rally.European corporate bond
issuance soared in this environment.
During May for example, Barclays
estimates €69.5 billion of euro
investment grade bonds were issued,
making it the busiest May since 2009.
UK issuance was more muted ahead
of the UK referendum.The vote to
leave was unexpected, and so the
immediate e ect has been a relatively
strong change in prices across markets;
although as at 24 June, in many cases
prices have not moved much beyond
their range of recent weeks. In our
view, subordinated bonds in the banking
and insurance sectors and non-
nancial hybrid bonds look attractive.
A fter a volatile start to the year, the
opening of Q2 was relatively
well as being encouraged
by a pick-up in sentiment towards
China, global equity markets for once
appeared to focus on corporate
earnings,which brought some
better-than-expected results,
especially out of the economic
indicators also appeared positive,
suggesting recent scal stimulus and
monetary policy were beginning to be
re ected in economic activity.This was
later backed up by more hawkish
language from the Federal Reserve in
May, but pockets of volatility remained.
UK equities and sterling uctuated
as nervousness surrounding the Brexit
referendummounted.The historic vote
to leave the EUwas bound to have a
signi cant impact on nancial markets;
and the long-term political, and
economic, implications for the UK,
Europe and beyond could be huge but
are largely unknown at present.
For the time being,we have not
changed our investment ideas, all of
which are judged on their potential to
deliver a positive return on a two- to
three-year time horizon and are
chosen from a diverse range of asset
types, geographies and currencies.
Paul Read and Paul Causer
While the volatility that
characterised the beginning
of the year subsided somewhat in the
second quarter, there’s no shortage
of potential headwinds facing nancial
markets.Whether it’s the potential
for a prolonged slowdown in China
or the adoption of negative interest
rates as a monetary policy tool,market
participants are confronted with
a challenging investing landscape.
During periods of uncertainty it’s
increasingly critical to recognise the
importance of having a disciplined
investment process and understanding
that as active investors we do not own
the market.
Though we do pay attention to
what’s happening in the broader
economy,macro events don’t factor
into our investment are
constantly on the lookout for
investment opportunities created by
market bottom-up
investors, our approach is centred on
conducting the fundamental research
required to nd good companies that
will be bigger in the future despite
economic headwinds.
34 | THE INVESTOR