Better trading improves investment performance for high yielding assets

Higher yielding assets – from a true yield perspective covering BBB credit to certain emerging market assets – are proving highly attractive at present and there are parts of those markets where investors need to be very cognisant of liquidity issues. Risk transfer can be more difficult as dealer often hold less balance sheet for this part of the market.

There has been a significant growth in the use of single name credit default swaps (CDS) and exchange traded funds both defensively and aggressively in high yield but inexperienced investment managers may not see the risk in the market, particularly with limits to Federal Reserve intervention, notes Scott Kimball, co-head of US fixed income at BMO Global Asset Management.

David Parker, head of MTS Markets International, highlights the advantages that electronification of the market can bring, and together they discuss how better trading can support returns for high yielding portfolios.

Published on March 31, 2021

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