The seminar entitled "Which alternatives to bond investments, in the current scenario of rising rates and extreme risks: the opportunity of bank credit funds" was held in Florence, organized by Nextam Partners - an independent asset management and guided advisory company by Carlo Gentili – and Muzinich & Co, an international boutique active in asset management and specialized in investments in Public and Private Corporate Credit. The meeting was attended by the CEO of Nextam Partners, Carlo Gentili and the top management of Muzinich & Co Filomena Cocco and Paolo Mancini, respectively European Marketing Director and Managing Director together with the manager of the Muzinich European Syndicated Loans fund, Sam McGairl.
During the seminar, the current scenario of the financial markets and interest rates at a global level was illustrated, highlighting a trend of recovery in rates and consequent fall in prices, which confirms the need for institutional investors to look at additional investment solutions compared to traditional liquid bond instruments. According to the experts, in fact, in this context, the bond yields of the past are increasingly difficult to obtain with certain portfolios and it is necessary to undertake alternative investment paths such as bank loan funds capable of offering attractive returns with limited long-term volatility, ensuring effective protection from market downturns. Naturally, since these are illiquid instruments, they must be considered in the right proportion within the portfolios.
Carlo Gentili, founder and CEO of Nextam Partners, declared: “In a context like the current one with returns artificially compressed by central banks and growing risk, it is necessary to review portfolios and adopt alternative investment solutions. Today to obtain a gross return of 1% it is necessary to invest over 5 years in Italy and over 30 years in Germany, unlike five years ago when 3 months in Italy and 6 years in Germany were enough. The perspective does not change if we look at the corporate segment where those aiming for returns above 1% must move to higher risk assets, i.e. with a lower rating, or take on an additional risk such as the exchange risk”.
Central bank intervention and investors' search for yield pushed the valuations of listed bonds to very high levels, resulting in lower expected returns and greater risks of corrections. The seminar brought out how the European listed bond markets today present even lower yields than the US ones, in order to invest in which one must bear onerous exchange rate hedging costs.
Sam McGairl, European Syndicated Loans fund manager at Muzinich & Co, commented: “The European Syndicated Loans promises are in line with the market outlook which shows accommodative ECB policy – despite rising inflation expectations – and a European economy with a constant trend of moderate growth, with spread levels that remain attractive compared to other bond asset classes in a context of low yields. Furthermore, the fundamentals of corporate credit overall remain solid and expected insolvency rates should remain low”.
The European Syndicated Loans fund managed by Muzinich &Co. presented at the meeting offers stable investment expectations with low volatility. Despite valuations being higher than in the past, syndicated loans continue to provide opportunities for below par average valuations in a context where valuations are higher than in the past. The philosophy adopted by the fund aims to achieve stable returns on risk throughout the credit cycle, avoiding defaults. The investment process is based on bottom-up fundamental credit research and leverages the managers' global perspective and experience gained over numerous market cycles to identify relative-value investment opportunities.
