Absolute Return Credit Fund Update - March 2023
The end of extremely cheap money and expanding central bank balance sheets, coupled with geopolitical and economic risk, and questions over bank credit quality (especially for regional US banks) mean that volatility is expected to remain in risk assets for some time yet. With the major central banks now appearing to be close to (or at) terminal rates, the risks to capital from duration risk are receding, but the significant yield curve inversion still makes longer maturity bonds look expensive.
As we await further clarification on the likely tightening of monetary conditions from stricter lending standards in the banking sector, we believe there will be opportunities to add beta, but right now is not the time to add significant portfolio risk. By investing in bonds with high average credit quality, attractive yields and low duration, the PMs are able to maximise the breakeven yields at a portfolio level, whilst producing a solid income.
Chris Bowie and Johnathan Owen provided a macro update on fixed income markets and an overview of positioning in the Vontobel Fund - TwentyFour Absolute Return Credit Fund and Vontobel Fund - TwentyFour Sustainable Short Term Bond Income
The update was followed by a Q&A session.