In this episode, we discuss key trends and positioning in credit markets with Brian Carney, lead portfolio manager of the Mawer global credit opportunities strategy. We touch on the year's strong performance driven by tighter spreads, higher yields, and emerging risks such as low risk premiums and the U.S. election. Topics include corporate issuance, fallen angels, and public-private credit convergence. Emphasizing capital preservation, Brian highlights portfolio positioning in high-quality, short-duration securities, such as North American bank bonds, while avoiding high-yield exposure.
Key Takeaways:
- Credit markets have performed well this year, driven by tighter spreads and higher benchmark yields, but risk premiums are historically low. Brian suggests investors prioritize capital preservation over chasing yield, avoiding high-yield bonds and long-dated credit. Post-U.S. election, vigilance is key amid potential policy-driven market shifts.
- Trends in the past quarter include fallen angels, commercial real estate risks, and potential high-yield defaults.
- An actively managed, absolute return credit strategy offers diversification, income, and potential capital appreciation while protecting against adverse credit and interest rate moves. It's ideal for long-term investors seeking alternatives to passive strategies and opportunities in volatile or distorted markets.
- Brian recommends investors view absolute return credit as a long-term allocation, not for market timing. Market dislocations are brief, and panic often prevents opportunistic moves.
- Mawer's portfolio is managed bottom-up, focusing on individual credit assessments to mitigate risk and seize opportunities. It prioritizes short-duration, high-quality holdings, avoids high yield, and ensures diversification with a maximum issuer cap of 10%, balancing downside risk and concentrated positions.
- Optimism abounds for long-term credit opportunities and future discussions on continued progress.
Host: Kevin Minas, CFA, MBA, CAIA
Mawer Institutional Portfolio Manager
Guest: Brian Carney, CIM
Mawer Portfolio Manager, Fixed Income
For more details and full transcript visit: https://mawer.com/the-art-of-boring/podcast
This episode is available for download anywhere you get your podcasts.
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Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.
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