search.noResults

search.searching

saml.title
dataCollection.invalidEmail
note.createNoteMessage

search.noResults

search.searching

orderForm.title

orderForm.productCode
orderForm.description
orderForm.quantity
orderForm.itemPrice
orderForm.price
orderForm.totalPrice
orderForm.deliveryDetails.billingAddress
orderForm.deliveryDetails.deliveryAddress
orderForm.noItems
Fallen angels – Roundtable


portfolio institutional: Is this a good time to follow a fallen angel strategy? Manuel Hayes: We at Mellon believe it is. The large BBB bloat in the corporate bond market, which is expanding thanks to an increase in large issuance, is a nice back- drop in this pandemic for more down- grades to take place.


In 2020, there were $200bn (£144bn) of downgrades in the US, across 270 bonds issued by 50 companies. It was an unusual amount, but in this pandemic with a BBB bloat overhang, 2021 should see an increased pace of downgrades. Only half of the downgrades seen in 2020 would provide a nice tailwind for investors to harvest. We have analysed big shocks, such as the great financial crisis, and fallen angels have strong returns in the subsequent year. If you expand that window by two to three years, there is a strong performance in the asset class. If 2021 rhymes with the past, we are in a good period to invest in fallen angels. Kate Hollis: Fallen angels have a structural premium, but most of that comes within a year or two after a downgrade. While there will be more fallen angels this year, it is unlikely to be on the scale of last year. Dinesh Visavadia: Because the opportunity after such an event is for one to three years at the most, there is not the agility in


trustees’ decision making to take advantage of this. By the time you do any- thing the opportunity is only half there, so it is often ignored. Stuart Trow: We have had downgrades without defaults getting out of control, so it is fertile ground. Added to which, spreads in the high-yield space are not back to where they were. That creates value for those who look at spreads rather than yields, whereas the BBB space is back to where it was. On a relative value basis, I am more enthusiastic about fallen angels than a lot of areas on the curve. David Weeks: In the short term, the fac- tors through which our members consider fallen angels are: diversification, spread,


Issue 102 | April 2021 | portfolio institutional | 43


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56