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Intelligent Insurer
THE pOWER OF
THE COUpON
Intelligent Insurer looks at the increasing
attractiveness of the high-yield bond market.
N
o one loves a fallen angel or non-investment grade US or European manufacturer quite year, and there is more to come, say industry observers.
like Aviva Investors’ high-yield bond team.
And that says nothing of the $80 billion or so in US
Aviva Investors, and its senior vice president and head of high-yield, Todd youngberg, have
dollar-denominated junk bonds issued this year that
made it their business to find the investment gems hidden within the junk bond market.
European investors can invest in when the manager
hedges the US dollar back to sterling or euros.
With its asset management arm having roughly $3.0 billion in high-yield bonds under
management, Aviva has successfully mined the high-yield field, finding innovative ways to youngberg has some 20 years’ experience in the high-
entice often risk-averse investors with a mix of experience and prudent management.
yield bond market—valuable expertise that has led to
given its insurance roots, Aviva’s asset management arm is perfectly placed to advise
a reasoned and seasoned approach. As well as being a
re/insurers. As other forms of asset returns have shrunk during the financial turmoil and
seasoned US bond market analyst, he has participated
become more volatile, many re/insurers have flocked to Treasury bills as a safe haven. but in the emergence of the European high-yield market
with a huge expected flow of new government paper likely to continue to come to the market,
over the past decade.
as well as tightening rates, re/insurers are again looking for sound vehicles that can produce
positive incomes and strong total returns.
“We are very selective,” he says. “We believe the best
opportunities are in the high-yield market currently, in
While risk-aversion levels may have been high during the past year as a result of the financial
the higher-quality tiers, such as double and single b,
market turmoil, youngberg has been in the thick of things as the traditional US high-yield
with a select group in triple C.”
bond market has expanded to incorporate a growing number of opportunities in Europe and
the rest of the world.
default rates are low at the quality end of the high-
As that risk aversion has ebbed, we have seen impressive gains in the high-yield bond
yield market and total income returns high, he adds,
market, which has outperformed almost all other asset classes. The recent rally amid the triple
which has consistently helped provide relative safety
C-rated market has seen liquidity flowing into the asset class. A whopping $5.0 billion of
and far greater total returns than can be expected on
euro-denominated junk bonds have been gobbled up by increasingly eager investors so far this Treasury bills and other government debt.
September 2009 | INTELLIGENT INSURER | 61
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