Diversified Income Newsletters

In March, we saw a broad-based sell off across most risk assets, as the COVID-19 pandemic expanded in its reach and severity. Credit markets weren’t immune, with credit spreads widening significantly. We talk about Hybrid exposures within the portfolio, risk management and positive steps taken offshore.

Australia hasn’t been immune as global interest rates head ever lower and conventional monetary policy reaches its limits. Over recent months, the Reserve Bank of Australia (RBA) has publicly contemplated at what point and how they would implement unconventional monetary policy or quantitative easing (QE).

In an environment where investment return expectations are low and many defensive assets are expensive, investors are faced with either accepting lower returns or increasing their risk tolerance in order to maintain returns. We understand that investors who are making an allocation to fixed income are attracted by the defensive characteristics fixed income offers, including liquidity, low capital volatility and income.

Like many sports, a good defence is critical to winning the long game when it comes to investing. A good offence will get you on the scoreboard but a good defence will help you win the game. As strong as your offence is, if your defence is weak, you won’t get very far.