Video transcripts layout 1 | Insight Investment

We're seeing one of the best entry points in over a decade for the yield and income available in global investment grade credit markets.

Investors in global investment grade credit are now receiving yields that are close to the long-run returns from equities. While equity returns can be volatile, returns from corporate bonds are typically more stable. Since companies are contractually obligated to pay interest to investors each year, this has led to a significant increase in both investment flows and client conversations around the asset class.

It is not only the attractive average yields that are capturing investors' attention. As inflation continues to decline from the peaks seen in 2022 and moves closer to central bank targets, policymakers are likely to reduce interest rates. When interest rates fall, bond prices generally rise, meaning that credit can evolve from being primarily an income-generating asset class into one that also delivers total returns.

The current environment is particularly favorable for active management because of ongoing economic, policy, and political uncertainty. Greater market volatility often creates more investment opportunities, allowing skilled managers to potentially generate returns above those of the broader asset class. A global credit strategy, unrestricted by geographic boundaries, can access the most attractive opportunities worldwide, capitalizing on differences across regions, asset classes, industries, and individual companies while actively managing risks.

Historically, rising interest rates, such as those experienced over the past few years, have led to an increase in bond issuer defaults or failures to repay debt obligations. However, investment grade bonds have traditionally carried a much lower default risk than high yield bonds. This cycle has been different, with defaults remaining relatively subdued. A key reason is that many corporations are currently in strong financial health, providing a margin of safety against more challenging economic conditions.

This reinforces our belief that now is an opportune time to allocate capital to actively managed global investment grade credit.