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Rob Bailey speaks to James Gledhill about his AXA Global High Income Fund.
Bookmarks:
0|AXA Global High Income Fund
51|High yield product offering
183|Global High Yield market
445|Macro environment
696|Interest Rates
808|Valuation and technicals
990|Market outlook
1209|US vs Europe
1464|Duration
1715|Fund positioning
1928|Conclusion
Duration:
00:35:27
Recorded Date:
30 April 2013
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Transcript:
Robert Bailey: Hello and welcome to today’s AXA Investment Managers webcast. I’m Rob Bailey, Head of UK Sales, and today I’m joined by James Gledhill. James is the Global Head of High Yield at AXA Investment Managers, and he’s also the Fund Manager of the AXA Global High Income Fund.
As always we’d welcome any questions you may have, you’ll find that on the browser in front of you. There’s the opportunity to submit questions, and we’ll answer as many of those as we can as we go along. But today we’re going to look at the Global High Yield market in total, have a look at the macro situation, have a look at the Fund that James is actually the manager of, and talk a little further into the portfolio on that.
As Head of Global High Yield, James really has responsibility for three main areas within our fund range. The global high yield sector, we’ll come back onto. There’s also the core high yield sector, where we have a number of offerings, and of course our short duration strategies which many of you will be familiar with. As I've mentioned James is the Fund Manager of the AXA Global High Income Fund. This is a fund he took over towards the late summer of last year, and has a good solid long term track record and delivers a yield currently in the region of about 6%, but again that’s something we’ll cover late on.
So first of all James, let’s talk a little bit about the team that you work with, the people that you manage the Fund with, but also the broader team that you’re the head of.
James Gledhill: Okay. So Global High Yield I guess is split into two sections. The European section is run mostly from London. We do have one person in Paris who helps us but there are four dedicated people in London. And we’ve got 13 people in the US under Carl Whitbeck, who runs the US high yield portion, looking at that. With the Global High Yield market approximately 80% US, 20% Europe, that’s broadly speaking how we’re split. We’re also part of a much wider fixed income operation. So we get considerable input from the Paris team in particular on things like the peripheral markets where some of the investment grade corporates are dropping down into high yield as those countries become more high yield in nature. So we’ve got quite a lot of input into the high yield market coming from there, also on the banking side actually in Europe is another area.
Generally speaking we’re running the high yield in line with the way that AXA IM approaches fixed income generally. So we’re very much looking at income and carry and believing that the return on fixed income generally comes from income really rather than capital return over time. So we have a relatively defensive approach to how we’re looking at it, not looking to shoot the lights out with capital but protect on the downside and take the income carry as the total return generator.
Robert Bailey: Well let’s start by having a look at the high yield market in totality. Talk us through the scale that you have to operate in and the scope within that market.
James Gledhill: I mean it’s grown very significantly as you can see on the chart from 2008, that was the last default peak. So firstly the assets were fairly lowly valued but also a number of them were defaulting at that stage. You can see how rapidly the market has grown fairly evenly actually between Europe and the US, it’s grown in both those areas. In Europe, it’s grown partly through fallen angels, so companies being downgraded out of investment grade into high yield partly through deteriorating economics but also through some of the countries in the periphery and through the banking area being marked down into the European region. There’s also been a shift of financing out of the bank loan market into the high yield market, which has caused that to grow, and has produced actually some pretty attractive investment opportunities. The US has grown in a similar fashion but not so much through those methods, more through new companies wanting to issue bonds.
The US and Europe are actually quite different. There’s a strong overweight in financials. The sector split at the bottom is for the overall market, so actually the banking industry doesn’t look too high for the overall global market. But within Europe, the banking sector is over 25%, so we need to be a little bit careful where we’re managing funds not to be too overweight in that sector. And the other probably key difference between Europe and the US is that the European market on average is much higher quality, much higher credit rating. And the reason for that is the reason that it’s grown, that we have had these utilities drop down from investment grade, some of the cyclical companies, the building materials, the steel businesses has dropped down from investment grade into the top of high yield.
So about 60% of the European market is BB, and we’ll come back to this later when we’re talking about default risk. It’s an important feature of the difference between the two markets when you’re looking at them. We’ve got yield-to-worst on this presentation showing about 5.8, this was at the end of March. It’s come down a little bit so it’s more like 5.4 now. We’ve had a relatively considerable rally through the April time.
Robert Bailey: Going back to that point you made about fallen angels and the credit rating, having nearly 50% of the overall market at BB is that something that’s massively out of step with where this market was five years ago, or has it been a consistent trend?
James Gledhill: It’s a bit higher. Historically the US had a higher BB proportion than Europe, and that’s really because the US historically has had listed businesses that have also used the high yield market. They’ve almost chosen to be BB companies rather than weak investment grade companies, so large mainstream listed well recognised businesses choosing to be BB. In the history of the European market we’ve never really had that. The European market grew through LBOs, through the leverage buyouts, the private equity, and those tended to be much more aggressively structured. So the European market historically was much more a B market. That’s changed over the last few years through the mechanisms that I've outlined.
So we’ve got Lafarge, HeidelbergCement, ArcelorMittal, Fiat and businesses like that, that have dropped down into the top of BB. They’re not private equity driven, they don’t want to have the most aggressive balance sheet they can have, which is broadly speaking what a private equity company would like, and in many cases they’d like to get back up into investment grade. So we’ve got listed businesses, quite large in nature, under pressure from the macro environment clearly, but sitting in the top of the high yield area. And we’ve also got things like Portugal Telecom and names of that sort of nature, and possibly going forward some of the Spanish utilities if Spain gets downgraded. So we’ve also got some utility like businesses in the top of European investment grade.
So that’s a bit of a change round actually that Europe has this slightly different dynamic. It’s not so overwhelmed by the private equity driven businesses as it used to be.
Robert Bailey: Well you mentioned Europe there, and you can’t really talk about Europe let alone the globe without focusing on the macro elements that we’ve encountered. I mean you’ve been with AXA Investment Managers for two years but clearly you’ve been working in this market a long time. The macro seems to be the first point of interest anybody has when looking at these markets.
James Gledhill: Well in risk assets generally speaking we’ve been in this risk on/risk off environment. We’ve been an environment of the European political scene being a massive influence. So I guess I launched one of the first high yield funds in Europe in 1998. 1998 through to the 2008 period what we cared about as high yield fund managers was the individual stocks really, and yes we were interested in the wider macroeconomic environment, but it was relatively stable and you didn’t have these enormous tail risks. So on the whole we were micro focused stock selectors. That’s still important, we still need to be micro focused stock selectors doing the credit risk work, high yield can default so you need to do the credit risk work well, but we’re much more interested now in the macro than we have been probably in the past because of these big tail risks and the political situation and the way that these political influences can move all risk asset markets quite considerably.
You know, the other thing we care about much more than we probably would have done in the past is technicals, by which I mean fund flows, which is really coming out of the central banks, which is probably something we’ll talk a little bit more about. World markets are being driven by liquidity to a larger extent than would have been the case in the past.
Robert Bailey: So let’s look at where we are in the current macro scene, give us your overview of what you think the macro outlook is?
James Gledhill: Well I mean very crudely I don’t think my view is particularly controversial; I think it’s relatively clear that the US market is in better shape than most other developed markets in terms of where the economy has been going. I think they’ve managed their transition and their austerity and their banking industry since the 2008/2009 period rather better. It’s okay, it’s not brilliant though, we do have I think the job creation coming through a little bit, we’re starting to see the construction turn in the housing market and these sort of things, but we’re seeing 2 to 3% GDP growth and we’ve never really seen the 4 to 5% that you would like to see coming out of a recession. So good but not fantastic. Then again I think relatively uncontroversially the core of Europe is doing better than the periphery of Europe.
I guess the thing to say, it’ll become clear that we continue to have a reasonably positive view on high yield. That’s not though because we think that economies are picking up in any great sense. We continue to think that core Europe will struggle; Germany, France, these sorts of countries, the UK actually struggles along around zero to a little bit better than zero, but we still think that the peripheral countries are in something of a vicious circle. Despite the fact that there is I think some reining back of austerity talk. The Italian Government has already in the first day taken some decisions which are reversing elements of austerity. Despite this general sense that we’re weakening a little bit on austerity, we still find the economic situation in Europe generally and the periphery in particular difficult. Not getting worse though.
So sometimes I get the comment that I’m a little bit negative on it. We’re not expecting it to fall off a cliff but neither are we expecting it to get significantly better than where it’s been for the last two years. And this is perhaps a little bit in contrast of what’s been going on in asset markets where we’ve seen equities rally quite considerably, high yield, we’ll come onto or been talking about, has rallied quite considerably. Core government bonds still continue to be relatively squeezed down. We think that’s more driven by the liquidity of the central banks, the Bank of Japan and all these sorts of issues, and people just having to invest somewhere rather than the markets taking a view that the economies are picking up in any big way.
Robert Bailey: So you don’t see the threat of interest rates rising in the near term?
James Gledhill: I think that’s pretty unlikely actually to be honest. I mean the talk at the moment is of the ECB actually cutting rates, although I don’t think that would have any great influence other than perhaps on confidence and sentiment. The reality of low interest rates feeding into for example Spain or Portugal or any of these areas, I don’t think the ECB cutting their interest rates has any monetary transmission effect into those countries. So it would be one of sentiment and sending a message rather than any real influence on markets in a direct fashion. But that’s still more the way we’re talking is QE from the Bank of Japan, ECB cutting rates. There are murmurings of the Fed actually wanting to reduce QE but I think that will also take some time. That will be a pivotal event by the way if that begins to happen, the Fed reining back on QE would be very important, but we don’t really sense that’s happening at this stage.
Robert Bailey: There’s been a lot of talk about that happening towards the end of the year in the broad markets, and were that to happen what do you think the impact would be on the high yield market?
James Gledhill: I don’t think it’s specific to the high yield market. I think asset, risk assets generally would come under quite a lot of pressure. I mean we have seen periods in the market over the last 18 months or so when people have started to think that QE was less likely for various reasons, and usually when that’s happening you see a pullback in risk assets generally, and high yield would be no exception to that. So you would see what you expect to happen I think, a bigger fall in equities than high yield, but high yield reacting on a short duration high credit basis. So this will happen at some stage, and I think it will be very uncomfortable for markets, but we don’t see it imminently.
Robert Bailey: Let’s go onto the technical aspects of high yield, and on this thing you’re saying that the valuations are reasonable rather than cheap.
James Gledhill: Yes. Last year to put it in perspective, 2012 was a very strong year for high yield, but we came into 2012 with very low valuations or really quite attractive valuations principally because the second half of 2011 had been such a weak period. So we started with very attractive valuations and we rallied very considerably, particularly after Draghi and the OMT and the ‘we’ll do anything it takes’, and we got past the Greek elections if you remember and all those sort of things. So in the US we had I think 16% total returns in high yield, and in Europe we actually had 26% total returns in high yield, driven in some respects anyway by the periphery performing really quite well post Draghi.
We come into this year after that rally with valuations at a reasonable level, and when we’re talking about valuations I tend to look at it in two fashions. There’s an absolute valuation as reflected by the yield, and just the overall yield of high yielding clearly on a historic basis we’re at pretty tight valuations actually on that sense. So in June/July of 2012 we broke through what had been historical lows in high yield, a variety of articles talking about that saying is high yield overvalued, but in that context you’ve got to think about where other fixed income asset classes are, and we’ve had historically very low yields for government bonds and investment grade bonds for a year or more before that. So actually in some respects high yield was rather late to the party. But nonetheless we broke through the historic lows and we talked about the global high yield market 5.8 on the slide, but about 5.4 now. This is low in historic terms.
So on that basis it’s pretty difficult to argue that there’s value. But I think the other way of looking at it is on a relative value basis, and this is essentially relative to government bonds, this is the so-called spread, the premium that risky credit trades over high quality government bond, and spreads remain still pretty wide. So the reason that high yield overall yields are so low is because government bond yields are so low, not because the credit element is particularly low. In fact the credit element is still quite reasonable, it’s a little below average over time, so we’re at about 450 basis points at the moment, and the average over time is about 500. So we’re below average but we’re seeing defaults that are way below average, that are actually really as low as you ever get them.
Defaults never quite go to zero, there’s always a few companies that are struggling, but defaults are as close to zero as you tend to see them at the moment. And importantly, we expect that to continue to be the case. I mean the key to whether you want to invest in high yield is do you expect defaults to remain low, and our answer is absolutely we do.
Robert Bailey: Well let’s explore that a bit further here with this market outlook slide showing European default rates going back to 1997. You can see the fact they’re at a low level. What’s keeping default rates so level? Is it just general corporate health or is there another driver for this?
James Gledhill: So a couple of things tend to go on. I mean clearly we had the default peak in 2008/2009, and what you get in that period is a sort of cleansing, a survival of the fittest sort of situation. So clearly the weakest companies at that point default, restructure, either disappear or reduce their debt and come back again in a rather healthier state. So by its nature you’ve taken out the weakest companies in the universe. So the average credit quality of the universe picks up. But then over the following years after the shock of 2008/2009 you’ve had management in companies following much more cautious policies, so they’ve wanted to pay down debt, reduce the debt on their balance sheet. They’ve wanted to extend the maturity of their debt; they’ve wanted to hold more cash; they’ve been doing less investment, less capex, less takeovers, these sorts of elements. Not great for the economy actually but quite good for the credit quality of the business generally.
So through sort of 2009/10/11/12 period on the whole, we’ve seen a continuing improvement in the credit quality of companies in the market. So that’s the first thing that’s kept default rates low. We’ve also talked about technicals or we’ll talk more about the technicals, there’s a lot of money available in market to refinance. So if a company has a sensible capital structure it will have actually very good access to refinancing at the moment. High yield companies, although small compared to very large cap equities, are actually quite big companies really, and they have very good access to finance at the moment. Again perhaps slightly different from small companies which are really struggling. So there’s lots of liquidity in markets and lots of financing available, so companies can roll out their debt into the future.
Companies do not default typically because they can’t meet interest payments; they default because they can’t repay a principal or refinance a principal. And at the moment it’s very straightforward for a company to refinance its principal, assuming that it has a sensible capitalisation. So the fact that there’s ready and available finance, growing markets and a booming in many senses high yield market also is a feature that keeps down defaults.
Moving forward, which is perhaps the more interesting question, in the US we are beginning to see more risk taking. So this is a business cycle feature that people are cautious after a default peak, they rebuild the balance sheet, but gradually as time passes you usually expect to see companies take more and more risk, and eventually they take so much risk and meet a declining economic environment and that creates the next default peak. But at the moment we’ve started to see in the US a turn in risk taking and we’re starting to see leverage pick up a little bit. But we’re in the early stages of that. It’s not something that’s particularly concerning at the moment, but it’s no longer leverage falling, it is leverage picking up. We’re starting to see a bit more event risk and those sorts of elements come in with M&A activity and such like.
Is that reasonable? I think it is, and it’s a feature of the fact that the US market is seeing a better macroeconomic environment. So they’re reacting to the fact that they’re seeing a better macroeconomic environment in that sense.
Robert Bailey: That’s one of your key decisions. Just moving onto the next slide is your weighting, we’ve had a question here about how do you decide your allocations to the US as opposed to Europe, and clearly the macro situation in the US you’re indicating is more positive.
James Gledhill: Better yes, and clearly the way we decide is we’re looking at the valuations between the two markets and risk essentially and volatility. To a degree liquidity actually - that also comes into our questions. So I think the instinctive gut response is look at the macro situation, everybody I think broadly agrees to different degrees that the US macro situation is better than the European macro situation, therefore in high yield wouldn’t you just be more comfortable with the US, shouldn’t that be the better option? And to a degree that’s true. But the US is reacting to the fact that it’s got the better macroeconomic environment, so we are seeing leverage pick up, and that’s negative from a credit perspective. So those two things are balancing off against each other. There’s a better macroeconomic environment, tick, good. There’s a worse risk taking environment in the sense that companies are beginning to take more risk because of that better macroeconomic environment, and that’s cancelling out essentially.
The flipside of that discussion is surely you would be very concerned about defaults in Europe, because the European macroeconomic environment is worse, and that makes a lot of sense. The reason we’re less concerned about that is because people know that the macroeconomic environment in Europe is worse, and they are reacting with that in mind. So whereas the US is starting to see leverage pick up, Europe is still seeing leverage decline. So European companies are still being cautious; they still recognise that they’re in a very weak macroeconomic environment and they are behaving with that in mind. So they’re still in what we would describe as sort of bunker mentality, and they’re being extremely cautious, they’re wanting as strong a balance sheet as they can manage in general. The other feature is you get default peaks or you get increases in default when you have a big gap between what people expect to happen and what actually happens.
So we would be in trouble in Europe if people expected a very strong economic recovery, but the reality was a very weak economic environment or even deeper recession. But at the moment people expect there to be a very difficult environment in Europe, are behaving as corporates with that in mind, and we expect them to see a relatively weak economic environment. So there isn’t this big gap between expectation and reality which is usually where you get a default peak from. And then coming back finally to the point we alluded to to begin with, the average credit quality in Europe is higher than in the US.
So this is slightly stylised but roughly speaking in Europe there’s 60% BBs and 40% Bs, and very few CCCs. In the US there’s 40% BBs, 40% Bs, there’s actually 17 or 18% CCCs. So it’s a much weaker overall market. So when you’re comparing the two markets and saying that the yields are roughly the same, which broadly speaking they are at the moment, you’re not quite comparing apples with apples, you’re comparing a more credit risk market with a lower credit risk market.
So when we roll this all together what we think actually is that default rates in the US and Europe far from being higher in Europe will actually be very similar in both, and if I had to guess I’d actually say the default rate in Europe will probably be lower than in the US.
So going back to the question about how we look at the two together, when we adjust for all these various things, we actually do find that the yields broadly speaking in Europe are about 80 basis points higher than the yields in the US, and we think that’s probably about right. It’s probably fair to reflect the fact that the US is a bigger market, more liquid, more easily traded and has less headline risk in terms of the politics and such like, whereas Europe is a bit less liquid and the Italian elections and these sorts of things which creating potentially larger ructions.
Robert Bailey: Let’s move away from the credit risk because having said that you think the credit risk is fairly low I guess currently, the other risk is the interest rate risk, and I’d quite like to understand how you manage the duration within the AXA Global High Income Fund.
James Gledhill: I think the premise behind the question is not quite right. I mean we’re saying on this chart we’re showing the distribution within the Fund of short and shortest duration, and those to us are things that are under two years and between two and three years, so there’s the very short maturity bonds, and then the longer duration and the nine plus yield bucket. So you can see on this chart that the portfolio, and this is true generally for all of our core high yield products, whether they’re global or localised, that we are somewhat overweight in the short and shortest duration buckets, so the most cautious parts of the universe.
Now people who follow AXA IM and the short duration strategies generally will know that we like this area of the market. It’s a lower return area than the overall high yield market, but a much lower risk area. So we think we get a very good sharp ratio, you know, return per unit of risk essentially from investing in this area. So given that we believe that, it would be silly not to be overweight this in our core portfolios as well as in our short duration portfolios.
It shows us being somewhat overweight versus the comparative benchmark (BofA ML Global High Yield Index). We think that we’re quite a lot more overweight versus our competitors, because certainly a lot of peers are rather underweight of short duration bonds Because they’re lower yield, because they’re lower return and they want to chase return and go after it. So we’re overweight in this relatively cautious area of the market. If we left it like that and then just invested the rest of the portfolio in the comparative benchmark for want of a better description, we would be underweight risk in the portfolio.
So we’re also overweight what is described here as the sort of nine plus bucket, but really this is B- companies, CCC companies as well, we’re perfectly happy to invest in CCCs, we actually quite like it as an area of the market, which is somewhat contentious, we can talk about that a little bit more if you like, but we’re overweight the riskier end of the market, but importantly not the riskiest. So we’re not going out and trying to find the most aggressive thing we can find and buy it, that’s more of a sort of distress debt type strategy, but we are definitely looking to stock pick essentially, choose between all the companies at the riskier end of high yield. So we have a bar bell here of short duration and the higher risk areas of the market.
But notice here that I’m talking about this really as risk. It’s really about credit risk, the way we’re thinking about this. You introduced it talking about duration; it does have a duration feature. So by doing that we are by definition underweight of the middle of the high yield markets, so these sort of 0 to 5%, 5 to 6% areas. These typically are BB bonds which also typically have a longer duration. So as a feature of this we are relatively short duration in the market. But it’s not so much a duration decision, that’s a happy outcome that we’re very comfortable with, with government bonds yielding sort of 1.2, 1.6% depending on where you are, for a 10 year, you’re well under 1% for a five year, we’re quite comfortable not having duration risk, but we really get to that position through managing credit risk and wanting to have short duration credit risk and nine plus B, CCC credit risk is really where we come out with it.
The duration is short though, so the overall universe I think on an earlier slide probably said 3.6 roughly speaking in terms of duration; our Fund is about 3. So the overall high yield index in and of itself is quite short duration, interest rate risk, and we’re shorter than that still. So our products are relatively insensitive to duration.
Robert Bailey: We’re almost out of time James, so just quickly as a summary of the Fund positioning, where you are now. You mentioned the yield, I mean the yield on the Fund here is 6.23, that’s come down a bit during the course of the…
James Gledhill: It’s a little lower than that now, but yes.
Robert Bailey: What are the other key factors you pull out from that?
James Gledhill: I think broadly speaking the diversity across the sectors, there is a reasonable weighting in basic industry you see there, which is a somewhat more cyclical sector, but we’re relatively cautious about the sort of things we’ll invest in there. Some of those companies are actually doing reasonably well but there’s very much a stock picking element in there. The other key thing that leaps out is services. Services is a very uncorrelated sector; you have a whole range of very different sorts of companies in services. Whereas banking or basic industries might be quite similar types of companies, chemical companies behave in a quite similar way often, steel, those sort of things, banking is a highly correlated area where if the general banking creditors going wider, they’re all going wider.
Services includes things like, we have a thing called Iron Mountain, which is a storage of paper documents company, you could have a travel agency, you could have businesses which are totally uncorrelated from each other. They also tend to be relatively low capital intensity, so the cash flow of the business can be more applied to servicing debt in a downturn or a difficult time, rather than being forced to be invested in capital equipment. So we tend to quite like that sector, but it’s a nicely uncorrelated sector.
I said that in Europe the banking sector is 25% of the market, you can see here that it’s 3% of the overall, and this is almost one of the features of a Global High Yield Fund rather than say a European high yield fund as you don’t have the sort of banking concentration, which we think is relatively attractive. We’ve talked about the relatively short duration. We have a reasonable weight in sterling in comparison to the overall universe, and I think the other sort of key thing that people will note on this is that we do have a fairly high percentage in CCCs compared to the universe. So I said in the US the CCCs was about 17, 18% of the universe; in Europe it’s about 4%. The vast majority, or certainly an overwhelming number of these CCCs come in our short duration bucket.
So one of the things that we’re looking at is duration time spread. So you’re taking more risk if you buy a long duration bond with a lot of spread times the two together. Our CCCs are very much in the short duration area where we’re taking a very short term view over whether we’re comfortable with that credit. And this is one of the things that works very well for us, it’s very frequently the case that we can be actually really very comfortable in a CCC credit when you’re looking out for six months or a year in a situation where you wouldn’t be very comfortable investing in the CCC credit for five years or seven years. And the other important feature is that rating agencies, you’re trying to stop me but I’ll just get this last bit in. Rating agencies are not taking a view on maturity, rating agencies are looking at the overall company and its balance sheet over time, and they don’t distinguish between a five year, a seven year bond and a six month bond or a one year bond, it will have the same rating, whereas the risk we think can be really quite different.
Robert Bailey: I’m sure that’s true. Just moving onto the final slide, we actually have a question that’s just come in asking whether now is actually a good time to be investing in the markets, so it’s probably a good opportunity for you to conclude with your key points.
James Gledhill: Yes, so I mean is it a good time to be investing? Well look, we’ve had quite a rally and I think this is true for all risk assets generally. And when we’re out meeting clients we see a lot of clients who are constantly waiting for a pullback, and it’s almost one of the reasons we’re not getting a pullback is I think there are a lot of people waiting for it. Could we have a correction in the second quarter, absolutely we could for some clearly unknown reason at this point, but it wouldn’t surprise me if there was a correction at some time. But if you’re looking over the next year, 18 months, two years, we do still think that this is a pretty attractive asset class.
Yes, the headline yield has come down quite a lot, but we think you’re being paid very well for the credit risk that you’re taking, the spread that you’re taking. We’re pretty confident the default rates do not pick up over that period, that’s both from an overall top down view, but it’s also from looking at individual credits. We’re clearly looking at everything and we don’t see that many that are that stressed, there are some definitely. And we say this despite the fact that this is not predicated on a particularly bullish macro view. So we’re not sat here saying the macro environment is going to improve a lot therefore these things are attractive.
A lot of the return has gone out of high yield, so we’re not getting 26% returns in European high yield like we got last year, but can you get 5, 6, 7, 8% sort of returns, I think yes you can. We do think though that it’s important as an investor at the moment to be thinking about central banks and such like. There is a lot of liquidity in markets; it is the reason that government bonds are trading at such low levels. It’s also a factor in investment grade bonds; it’s also a factor in high yield bonds. But it will continue to be a factor. If we thought that central banks were suddenly going to start reining back in a meaningful fashion from QE and the like, the equivalent policies of the other central banks, I would have a different view of risk assets generally. But at the moment we continue to think that that liquidity will push on risk assets, and it might be right to wait for a pullback, if you see a pullback I would definitely invest, but a lot of people are waiting for that to happen and have been for some time, and the markets have just got tighter while that happened.
Robert Bailey: Very good, all right, well thank you very much James, and thank you very much for watching today’s webcast. I've been joined by James Gledhill who’s Global Head of High Yield at AXA Investment Managers, and I hope to see you next time, thank you for joining us.
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This presentation does not constitute an offer to sell or buy any units in the Fund. Information relating to investments may have been based on research and analysis undertaken or procured by AXA Investment Managers UK Limited for its own purpose and may have been made available to other expertises within the AXA Investment Managers Group of Companies who in turn may have acted upon it. Whilst every care is taken over these comments, no responsibility is accepted for errors omissions that may be contained therein. It is therefore not to be taken as a recommendation to enter into any investment transactions. Information in this document may be updated from time to time and may vary from previous or future published versions of the document.
This presentation should not be regarded as an offer, solicitation, invitation or recommendation to subscribe for any AXA investment service or product and is being provided for informational purposes only. The views expressed do not constitute investment advice and do not necessarily represent the views of any company within the AXA Investment Managers Group and may be subject to change without notice. No representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein.
Past performance is not a guide to future performance. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Changes in exchange rates will affect the value of investments made overseas. Fixed income securities are subject to interest rate risk, credit risk, prepayment risk and market risk. High yield securities are subject to a greater risk of loss of principal and interests than higher-rated, investment grade fixed income securities. Investors in offshore vehicles advised or sub-advised, in whole or in part, by AXA Investment Managers Group employing the investment strategy described herein may be subject to currency exchange risk. There is no guarantee that the objectives of the investment strategy described herein will be achieved. Investments in newer markets and smaller companies offer the possibility of higher returns but may also involve a higher degree of risk. An initial charge is usually made when you purchase units. Your investment should be for the medium to long term i.e. typically 5-10 years.
Before investing, you should read the prospectus, which includes investment risks relating to these funds. The information contained herein is not a substitute for independent advice.
The funds described in this presentation are administered and managed by companies within the AXA Investment Managers Group and can be marketed in certain jurisdictions only. It is your responsibility to be aware of the applicable laws and regulations of your country of residence. Further information is available in the prospectus or other constitutional document for each fund or by visiting www.axa-im-international.com
AXA WF Global High Yield Bonds is a sub-fund of AXA World Funds SICAV, which is a Luxembourg-domiciled, recognised by the UK Financial Conduct authority and available for sale to the public in the UK. A SICAV is a type of open-ended investment fund in which the amount of capital in the fund varies according to the number of investors, similar to a UK ICVC. SICAV funds are some of the most common investment vehicles in Europe. There may be tax implications for a UK investor investing in the Fund and tax advice should be obtained before an investment is made.
AXA Fixed Income is an expertise of AXA Investment Managers UK Limited. Issued by AXA Investment Managers UK Limited, which is authorized and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX. Telephone calls may be recorded for quality assurance purposes. 16860 04/2013
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