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Capturing the right credit 

September 8, 2016

Paul Mackintosh, Asia Asset Management 

The region that did so much to create the global sovereign debt crisis may still have its work cut out to completely rebuild investor confidence, especially in the aftermath of Brexit and with so many other political tensions and issues still unresolved. Yet Europe’s fixed-income story – whether sovereign and quasi-sovereign or corporate – may still be an under appreciated investment case. “Economic activity in Europe is improving, slowly, but pointing in the right direction,” asserts Luca Simoncelli, director and investment manager of cross asset solutions at Unigestion. So, despite the negatives already alluded to, can European credits and bonds be a valuable focus for investors?

Given the political risk levels in the European market at the moment and an apparent split in the demand picture between corporate credits and sovereigns, there seems to be a big performance premium involved in capturing the right credit. Sean Taylor, chief investment officer for Asia Pacific at Deutsche Asset Management, affirms, “European sovereign debt was much more top-down than European corporate credit”. In this area, he advises allocating “more on broader macro issues like growth rates, reform measures, as well as fiscal policies and the European Central Bank’s (ECB) monetary policy.”

However, he adds: “For European credits, the bottom-up view should be of much greater importance. Read more

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