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Institutional Update Q1 2017

Jeff Boswell
Garland Hansmann
Co-Portfolio Managers

Strategy focus
Multi-Asset Credit

Jeff Boswell Strategy Leader
Garland Hansmann Co-Portfolio Managers

Strategy focus
Multi-Asset Credit


Multi-Asset Credit – why now?

We believe a Multi-Asset Credit (MAC) strategy can offer higher yield while controlling risk by diversifying across different credit segments. While interest rates remain on an uncertain path, a MAC approach can also have low interest rate risk through the use of loans and high yield bonds with low duration. In addition, with volatility within financial markets becoming ever more common, we believe a flexible and reactive investment strategy will be far better placed to navigate through different market conditions.


A flexible, active credit strategy

At its core, our MAC strategy focuses on each of the significant developed credit markets: investment grade, high yield, and leveraged loans. Alongside this core focus, we can allocate to emerging market credit and structured credit, should we see sufficient value. Across these markets we seek to target the most efficient use of capital using security selection, beta management and asset allocation as sources of alpha. This dynamic portfolio evolves, adapting to market conditions, risk premia and liquidity.


Unconstrained bottom-up investing

Given our unconstrained approach to investing, the MAC portfolio consists of our best ideas across the credit spectrum, with complete benchmark independence in asset selection. We fundamentally believe that constructing portfolios bottom-up, in a risk-controlled manner, ultimately leads to a better investment result.


Past performance should not be taken as a guide to the future, losses may be made. Figure 1 & 2: client returns will be reduced by deduction of management fees and other composite Strategy.*Multi-Asset Credit Strategy inception date: 01.01.16. **Performance target: 3M LIBOR +5% p.a. This represents a return target, not a guaranteed return.

Portfolio benefits:

  • Bigger investable universe from which to choose, allowing for a wider opportunity set.
  • Credit asset class diversification leads to a better spread of risk and also less propensity for unproductive index biased investing.
  • Pricing inefficiency caused by individual asset class flows can create over or under valuations between asset classes.
  • Similar risk can often be mispriced between markets due to illiquidity premiums or structural complexity.
  • Credit asset class complexities are simplified through a single MAC solution where the manager deals with all implementation, structural and liquidity considerations.
  • This approach led to dynamic asset allocation across the credit markets, regionally and by asset class, which was a key driver of performance.
  • The performance through the year also illustrated the benefit of diversification across different sources of return, with robust performance through a variety of significant events.

Strong performance

Figure 1: Annual (gross) performance in USD


Figure 2: Annualised (gross) performance in USD


Source: Investec Asset Management, 31.12.16.

  • The Strategy had a strong first year, in what was generally a positive environment for credit markets.
  • We believe the performance of the Strategy validated our value approach which was particularly relevant in a year of periodic divergent performance across different credit asset classes.
  • This approach led to dynamic asset allocation across the credit markets, regionally and by asset class, which was a key driver of performance.
  • The performance through the year also illustrated the benefit of diversification across different sources of return, with robust performance through a variety of significant events.

Key benefits of the Investec Multi-Asset Credit Strategy:

  • A well-diversified portfolio, addressing investors’ need for risk-controlled income in today’s low-yield environment.
  • Targeting a return of cash +4-6% per year, through the credit cycle**.
  • Unfettered by region or benchmark.Region and benchmark agnostic
  • Managed by a single, globally integrated team operating as a coherent unit.
  • Experienced professionals with a thorough understanding of the multi-asset credit markets, with an average of over 14 years industry experience
  • Integrated with a well-regarded Multi-Asset and Emerging Market Fixed Income team.
  • Dynamic and disciplined screening identifies a wide range of opportunities enabling us to construct a ‘best ideas’ portfolio.
  • Careful security selection and rigorous management process built around our bespoke ‘Compelling Forces™' investment framework.
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