One of our favoured fixed income sectors for 2021 is financials where we believe banks and insurance bonds can offer investors credit spread contraction and overall relative value opportunities.
As we have previously mentioned, our belief was that banks would have to prove their resilience through a whole economic cycle before investors would start to become fully comfortable with the asset class. Following the onset of the pandemic this now being illustrated and the recent regulatory curtailment of equity distribution has only added to the value that we think bank capital bonds can currently offer. Despite these factors, most bonds in the subordinated banking sector continue to trade at a premium, which we believe will gradually erode as the economic recovery continues over the medium term.
Similarly, the insurance sector is viewed with a degree of wariness by some investors, given the cyclical nature and high level of fixed income assets held on insurance company balance sheets, resulting in the sector typically showing a relatively high level of volatility in periods of economic stress. Despite robust balance sheets and relatively high credit ratings this sub-sector still frequently offers a credit spread premium compared to other fixed income corporate sectors of similar rating quality.
In this virtual session, Partners & Portfolio Managers Gary Kirk & Gordon Shannon will share their views on the current opportunities within financials.The session will be structured around a number of topics, including: