Why is it essential in 2016 to change the way we invest in bonds?
Central banks are contending with economic uncertainties both in their own geographical areas and at a global level. Having increased its benchmark rate from 0.25 to 0.50% last December, the US Federal Reserve made no change to its monetary policy during the first quarter of 2016. The European Central Bank, for its part, lowered its key rates in March (interest rate on the main refinancing operations at 0%, marginal lending facility at 0.25% and deposit facility at 0.40%), while at the same time launching refinancing operations to stimulate the economy.
This has left traditional bond investors with a bit of a headache, since yields on high quality bonds may not offer high enough returns even though they continue to entail high risk.
Investors must therefore look beyond traditional bond investment strategies if they want to obtain better returns for reasonable risk-taking.
The bond universe offers a broad range of choice, and is not limited to traditional sovereign bonds. In the current market environment, investors need to diversify their investments.
Selection can be made from various sources of potential yield on the bond markets, depending on the level of "risk" the investor wishes to assume.
Dynamic short-term products
Free from index constraints, these products allow investors to achieve higher returns over a short-term investment horizon by taking advantage of various opportunities to create value in relation to their respective benchmark index.
Reference product : PARVEST ENHANCED CASH 6 MONTHS
These offer returns on the equity component and mitigation from equity downside thanks to the bond floor.
Reference product : PARVEST CONVERTIBLE BOND EUROPE
These products are designed to create absolute return in all market environments. They are not linked to a benchmark index. Long/short strategies combine performance and pre-defined risk-taking over a minimum investment horizon of two years.
Reference product : PARVEST BOND ABSOLUTE RETURN V350
Among products that seek to create returns in different market environments, a new bond investment trend is emerging: innovative strategies that combine a non-benchmarked approach with factor investing principles. Such products offer investors potentially attractive returns for reasonable and pre-defined risk assumption.
Reference product : PARVEST BOND WORLD INCOME
BNP Paribas Asset Management (BNPP AM) and investing in bonds
- BNPP AM manages EUR 282 billion in bonds and money market instruments (nearly half of its total assets under management) and has more than 200 specialised investment managers working in this area1.
- We also have more than twenty years of experience in applying strategies without investment constraints and absolute return strategies.
1. Source: BNPP AM at end-December 2015.
Investments in sub-funds are subject to market fluctuations and the risks inherent in marketable securities investments. The value of the investments and their returns may increase or decrease and investors may not recover their initial capital. The fund described above entails the risk of capital loss.
Our selection of funds
European Fixed Income – Patrick Barbe