Credit Emerges as Attractive Source of Returns - Pictet Asset Management Insights

Discover insights from Pictet Asset Management on the fixed income outlook, including the appeal of credit for risk-adjusted returns and strategic approaches to navigate market volatility.

Pictet Asset Management, a division of Swiss private bank Pictet, recently held a media roundtable to discuss the current outlook for fixed income investments. Jon Mawby, co-head of absolute and total return credit at Pictet Asset Management, highlighted that credit has become an attractive source of risk-adjusted returns. Mawby emphasized the importance of a contrarian and value-driven approach in navigating the volatility of government bond and credit markets. He stressed the need for strategic thinking to create a credit portfolio with lower correlation to risk assets, allowing investors to capitalize on market fluctuations.

Mawby also shared his views on the monetary policies of central banks, suggesting that the US Federal Reserve and the Bank of England should consider cutting interest rates to stimulate growth ahead of upcoming elections. UBS Global Wealth Management echoed concerns about the likelihood of higher US rates persisting, despite recent data showing subdued producer prices. The firm remains optimistic about the outlook for quality bonds and equities, citing strong inflation and labor market indicators.

In terms of investment opportunities, Pictet Asset Management offers the Luxembourg-domiciled Pictet-Strategic Credit fund, which provides exposure to various bond categories, including corporate, government, and convertible bonds. The fund invests globally, including in emerging markets and mainland China, across different sectors and credit qualities. Mary-Therese Barton, chief investment officer of fixed income at Pictet AM, highlighted the firm's expansion into Asia with the launch of the Pictet-China Environmental Opportunities fund. This fund focuses on investing in Chinese companies involved in environmental solutions, aiming for capital growth in sectors such as renewable energy, green transport, and industrial decarbonization.

Despite the potential in emerging markets, Barton noted that developed markets continue to dominate due to macroeconomic and geopolitical uncertainties. She emphasized the long-term potential of emerging markets, suggesting that they could offer compelling investment opportunities in the future.

The discussions at the Pictet Asset Management roundtable underscored the importance of a strategic and value-driven approach in navigating the current fixed income landscape. With a focus on credit opportunities and global market dynamics, investors can position themselves to capitalize on market volatility and emerging trends.