The rate of coronavirus spread remains uncertain, as uncertain continues to be the evolution of the economy and markets. The most optimistic continue to cite the commitment of governments to monetary and fiscal support, which is beginning to be applied in some developed markets, progressing slowly as vaccine research continues.
Conversely, the most pessimistic reiterate the risks that may yet to come. There is no vaccine, the economic cost is not yet quantified, much of the aid comes in the form of liquidity and not real economic fundamentals and the path of possible reinfection is still unknown.
Let’s consider three possible scenarios: 1) OptimisticAccording to which, the recent reopening of the economy would mark the start of the recovery during June, without seeing any need for new confinements 2) Moderate, in which the economy will be growing at levels prior to the start of ‘was covid’At the end of the year and 3) Pessimistic, with an economy in continued deceleration, increase in unemployment, decrease in hiring, increase in debt and of the volatility.
Assuming that the moderate scenario is the most possible, between the dilemma of investing in variable income or credit, credit offers greater possibilities.
Credit is not only the sap that feeds the market, but also offers a scale of different types of debt, by credit rating: guaranteed senior debt (mortgage bonds) senior debt (bonds or ordinary obligations) subordinated debt (preferred shares) and hybrid debt (convertible bonds). The first two they are the ones with the highest credit level and, therefore, the highest priority in the event of default or bankruptcy.
Funds to bet on credit
Of the funds of the category of Global Private Debt, a selection has been made among those that, obtaining the five-star rating of VDOS, require a minimum contribution equal to or less than 6,000 euros and are in the first positions for profitability in the year.
The most profitable of this group is GOLDMAN SACHS GLOBAL CREDIT PORTFOLIO (HEDGED) R USD CAP with a revaluation of 4.85% this year. In the last annual period, its profitability is 12.08%, with a cost for volatility of 13.2%.
Designed for investors with a long-term investment horizon, invests primarily in securities of investment-grade issuer companies around the world. It takes as a reference for its management the index Barclays Global Aggregate Corporate.
Between his higher positions We find Futures contracts on 10-year US Treasury notes June 20 (5.91%) in addition to the issuance of Charter Communications Operating, LLC / Charter Communications Operating Capi, Dell International and EMC Corporation and Madison Park Funding.
Performance of the analyzed credit funds | You
The subscription of the capitalization class R with dollar coverage of this fund requires a minimum initial contribution of $ 5,000 (approximately 4,500 euros), applying a fixed fee of 0.40% to its participants.
Also denominated in dollars, highlights Class A capitalization of LEGG MASON WESTERN ASSET GLOBAL CREDIT FUND, which has advanced 3.93% since January. After one year, it increased by 9.6%, with a volatility figure of 11.3%.
The strategy invests at least two-thirds of its net assets in corporate debt securities of global issuers, denominated in dollars, yen, euros, pounds sterling and other currencies and which are listed or traded on regulated markets, hedging in dollars.
The largest positions are represented by securities issued by UST N / B 0.625 2027, Mitsubishi, Vonovia Fin, CVS Healt and Citigroup. The subscription involves a minimum initial payment of $ 1,000 (approximately 4,500 euros) applying a fixed commission of 1.05% and a deposit of 0.15%.
Focusing your investment in investment grade rated emissions, we also found the BLUEBAY FUNDS – BLUEBAY GLOBAL INVESTMENT GRADE CORPORATE BOND with a yield of 3.8% this year, in its C class in dollars, and 10.5% one year, with a volatility figure in this last period of 13.12%.
This fund invests at least 65% of its net assets in securities fixed income bond with investment grade rating. The titles with the most weight in your portfolio are Broadcom Inc 4.75% (1.51%) Telefonica Europe B V 3.88% (1.36%) Jimmy John’s Funding Llc 4.85% (1.26%) CKE Restaurants, Inc. 4.96% (1.19%) and Altria Group, Inc. 4.8% (1.19%). Its participants bear a fixed commission of 2%.
For now, the market is waiting. The quality credit may offer opportunities at this point in the cycle. Opportunity to have carry in the short term and potential to generate capital benefits when the market normalizes, which, according to the moderate scenario, is expected to happen towards the end of 2020 or the beginning of 2021.
*** Paula Mercado is Director of Analysis at VDOS.