Industry Voice: An attractive income without lowering quality

Opportunities exist though caution is advised

Gareth Jones
clock • 1 min read
Flavio Carpenzano, investment director at Capital Group
Image:

Flavio Carpenzano, investment director at Capital Group

The sell-off that we saw in fixed income in 2022 has been the worst in decades. However, the positive outcome is that yields have rapidly reached levels we have not seen in generations.

This means there are opportunities to achieve a good income without necessarily diving into lower credit quality, says Flavio Carpenzano, investment director at Capital Group.

Even within the context of a high-quality portfolio, Capital Group's Global Corporate Bond Fund (LUX) is taking a relatively conservative positioning at present due to the level of uncertainty in the global economy.

"We've had a taste of what could be to come with the issues around pension funds and liability-driven investment in the UK, where you have a big repricing in gilts and the volatility this creates in the market," he says. "In the US, our concern is that we haven't seen the impact on shadow banking - the non-traditional banking sector."

Midstream energy

For different reasons, the fund is also cautious about midstream energy, and has a below-index position in this sector as a result. These companies have enjoyed huge increases in earnings and profits due to high commodity prices, but they haven't taken the opportunity to deleverage their balance sheets, says Carpenzano. 

By contrast, the banking sector is a high-conviction area for the portfolio. "It has undergone 20 years of deleveraging, so even if you have a recession and an increase in non-performing loans, the banks can absorb these losses," he says.

For more on the risks and opportunities in fixed income, read our exclusive Spotlight guide

More on Partner Insight

Partner Insight: How philanthropy advice could head off a client crisis

Partner Insight: How philanthropy advice could head off a client crisis

Younger clients are more likely to want advice on charitable giving

Gareth Jones
clock 08 February 2024 • 1 min read
Partner Insight: Cash vs investing — five key points to consider when talking to clients

Partner Insight: Cash vs investing — five key points to consider when talking to clients

Gillian Hepburn
clock 19 October 2023 • 5 min read
Partner Insight: Is 'strategic' still a dirty word? That depends...

Partner Insight: Is 'strategic' still a dirty word? That depends...

Some strategic bond funds are more effective than others

Gareth Jones
clock 15 August 2023 • 1 min read

In-depth

Firefighter to adviser: Ian O'Dowd on assessing the situation

Firefighter to adviser: Ian O'Dowd on assessing the situation

‘I don’t go into burning buildings to save financial plans, but the same ethos rings true’

Isabel Baxter
clock 10 April 2024 • 4 min read
US and UK elections: Opportunity or not for multi-asset investors?

US and UK elections: Opportunity or not for multi-asset investors?

‘The post-election environment has been historically positive for markets’

Charlotte Moore
clock 09 April 2024 • 4 min read
Are advisers using tax-efficient investing vehicles enough?

Are advisers using tax-efficient investing vehicles enough?

‘You should never let the tax tail wag the investment dog’

Isabel Baxter
clock 03 April 2024 • 7 min read