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Natixis Credit Opportunities: how total return strategies can make a difference?

13.06.2017

In today’s investment environment, characterized by low rates, and geopolitical uncertainties, where can fixed income investors turn for yield?

Traditionally, credit markets offer a competitive yield well above government bonds in line with their credit quality. Investors can capture yield from a diversified portfolio of credit securities –
corporate bonds, asset backed securities, and high yield bonds. However spread and yield compression following the CSPP and PSPP has even taken its toll on credit indices. The bright side is that the prolonged European central bank intervention and the good fundamentals credit opportunities remain. Moreover, market volatility due to geopolitical events like French elections or Brexit can be seen as positive for a total return portfolio. A return to volatility can mean a broader opportunity set.

Many skilled management teams run core or core plus portfolios, but there’s a clinch: sometimes, the biggest drag on performance can be “owning the benchmark” rather than the “top picks”. Increasingly, investors are finding that a broader opportunity set can be captured in credit markets if the manager is not tied to a traditional cap-weighted benchmark. Rather, given the flexibility to navigate across instruments, strategies and structures, a skilled manager can uncover sources of performance even in difficult market contexts.

 

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