Investors should also keep watch for heightened idiosyncratic risks among newer entrants to the corporate debt market. The common thread linking many of the European high-yield blow ups in 2014 was that these firms entered the debt capital markets in the past three years. They issued debt on the assumption that business growth would enable repayment – clearly, this assumption is now being questioned.
Combined, these dynamics mean that selectivity – paying the right price for the right securities – will be crucial to outperforming in 2015.
Mitch Reznick is co-head of credit and head of credit research at Hermes Investment Management
Fixed income: in numbers
£139m
Total net retail sales into Investment Association-listed fixed income funds in October 2014
15.2%
Percentage of Investment Association total assets held in fixed income vehicles as of October 2014
£162.9m
Net retail sales of the best-selling bond sector – sterling corporate bonds – in October 2014
