![Flavio Carpenzano, investment director at Capital Group Flavio Carpenzano, investment director at Capital Group](https://image.chitra.live/api/v1/wps/bf5aeea/bc413599-c5e6-467b-9906-8dd6b8cb69de/8/Spotlight-CapGroup-Jan23-Flavio-roi-1-679x419.jpg)
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