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Corporate bonds at most attractive for many years

Wednesday, 5 March 2008

Robert Talbut, CIO at Royal London Asset Management (RLAM) argues that current market behaviour is presenting some compelling opportunities for investors.

In contrast to equities, where investors have been trying to call the bottom of the market since the start of the year, the corporate bond market has continued to sell off to fresh lows week on week. The question is whether the bond market has a different global economic view to equity markets or whether it is reacting to different factors – the latter being true in Talbut's view.

Conditions within the corporate bond market are the worst for some time:

  • The financial crisis has led to intense technical stress and dislocations as investors reduce risk due to credit rating triggers, mark-to-market constraints and failed structured products;
  • The volume of apparent forced sellers is likely to increase as financial institutions continue to deleverage;
  • Such stresses, as experienced in equity markets in 2003, are creating excellent entry points into good quality investment grade debt securities.

Robert Talbut said, "I believe equity and credit markets are currently dancing to different tunes and that near term opportunities reside in investment grade debt.

At some stage in 2008, the time will be right to buy equities again but in the short term, the reality of high yields coupled with the potential of capital growth present the best opportunity selectively to buy corporate bonds for many years. At RLAM, we are therefore increasing our allocation to investment grade credit within our multi-asset portfolios, in anticipation of attractive returns over a one to three year period."

- ENDS -

For further information:

RLAM
Stephen Watchorn
Tel: 020 7506 6582
Stephen.watchorn@rlam.co.uk

 

Quill Communications
Jo Stonier
Tel: 020 7758 2230
Jo.s@quillcommunicate.com

 

Editor's notes:

  • Number of investment professionals in RLAM's fixed interest team = 10
  • Fixed interest and cash funds under management at RLAM = £18.47bn (as at 31/01/08)
  • Average experience of current fixed interest team members = 16 years

RLAM's fixed interest team has won a number of industry awards in recent years, recognising the strong performance that our experienced team offers. These include:

  • UK Fixed Interest Manager of the Year in the Specialist & Alternative Investment Manager Awards 2007.
  • European Fixed Income Manager of the Year in the 2007 Global Investor Awards for Investment Excellence.
  • Royal London UK Government Bond Trust named Government Bond Fund of the Year in the Portfolio Adviser Fund Awards 2007.
  • UK Pensions Specialist Manager of the Year 2006 and 2005 (Professional Pensions) and short-listed in 2007.
  • UK Pensions Fixed Income Manager of the Year 2005 and short-listed 2006 and 2007 (Professional Pensions).
  • Investment Week's UK Corporate Bond Fund Manager of the Year 2005 and short-listed in 2004 and 2006.
  • MoneyWise 2006 Awards highly commended for RL UK Corporate Bond fund.
  • Royal London Corporate Bond Trust AAA rated by Forsyth
  • Royal London Sterling Extra Yield Bond Fund AAA rated by Forsyth Partners.

Royal London Asset Management (RLAM)

was established in 1988 and specialises in providing investment management solutions for both the Royal London Group and a range of external institutions. These include FTSE 250 companies, local authorities, universities, charities, wealth managers, financial advisers and private clients. RLAM manages over £31bn of assets, employing more than 50 experienced investment professionals in our London based office.

Royal London Group

is a specialist financial service provider. Its businesses focus on those sectors of the market which value premium propositions, operating through a number of brands:

  • Scottish Life – UK pensions market
  • Bright Grey – UK protection market
  • Scottish Life International – offshore investment markets
  • RLAM – fund management
  • RLAS – life and pensions administration
  • Fundsdirect / Ascentric – funds supermarket; Wrap Platform

Royal London is the largest mutual life and pensions company in the UK with Group funds under management of £33.1 billion. Group businesses serve around three million customers and employ 2,620 people. (Figures quoted are as at 31 December 2007).