Secure income – Portfolio Insight
We talk about the negative impact of the pandemic, but it is going to reinforce positive views about credit and that will support certain market dynamics. The most defensive credits will continue to outperform from liquidity, rating and pricing perspectives.
see is that the effects of this situation will reinforce positive credit views. Commentary is often very focused on negative impacts, but it is going to rein- force positive views about credit and that will support certain market dynamics. The most defensive credits will continue to outperform from liquidity, rating and pricing perspectives.
Investor appetite from the likes of our- selves should encourage a greater level of issuance from issuers in those spaces.
How will the recent government stimulus packages affect secure income assets?
Central bank stimulus packages have un- doubtedly supported public bond market spreads, and they are set to do so for at least the short term.
They have shown a willingness to sup- port the economy in a way that has un- derpinned the bond market and subse- quent spread levels. In this respect, we do not necessarily think that current spread levels truly reflect the risk in certain areas, particu- larly those areas that are vulnerable to short-term disruption of supply chains, have exposure to global recessions and potentially certain companies’ access to
funding. Spreads in private markets tend to lag public markets, which has seen our universe generate good value in areas we like. For example, we have remained focused on more defensive sectors - utili- ties, consumer non-cyclical, housing associations and renewables. As a buy-and-hold investor, we believe that secure income assets will deliver on our cash flow needs. Importantly, we expect such issuers to perform well across cycles and from a value perspec- tive outperform over time because of their lower sensitivity to the wider market.
Important Information: Past performance is no guarantee of future results. The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested. Views expressed are of LGIM as at 01 September 2020.
The Information in this document (a) is for information purposes only and we are not soliciting any action based on it, and (b) is not a recommendation to buy or sell securities or pursue a particular investment strategy; and (c) is not investment, legal, regulatory or tax advice. Legal & General Investment Management Limited. Registered in England and Wales No. 02091894. Registered Of- fice: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No. 119272.
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