Alain Krief, Oddo Asset Management - Knack

30 Pages·2014·0.7 MB·English

Bond Investment Strategies
2014: Give me credit !

Oddo AM Expertise
INTENDED SOLELY FOR PROFESSIONAL CLIENTS (MIFID)
Alain Krief, Gérant High Yield, Responsable de la gestion Fixed Income
Alexander Eventon, Gérant Senior Investment Grade

Olivier Becker, Gérant-Analyste High Yield
Disclaimer
This document has been drawn up by Oddo Asset Management and is exclusively dedicated to professional clients (MIFID).
It may not be circulated among the public. Potential investors are invited to consult an investment advisor before subscribing
to the fund. However, should they decide to subscribe, investors undertake to consult the Key Investor Information Document
(KIID) or the fund’s prospectus in order to acquaint themselves with the precise nature of any risks incurred, in particular the risk
of capital loss. The value of the investment may vary both upwards and downwards and may not be returned in full. The
investment must be made in accordance with investors’ investment objectives, their investment horizon and their capacity to
deal with the risk arising from the transaction.Investors are reminded that past performance is not a reliable indication of future
returns and is not constant over time. Any opinions presented in this document result from our market forecasts on the
publication date. They are subject to change according to market conditions and Oddo AM shall not in any case be held
contractually liable for them. The Key Investor Information Document (French, English) and the prospectus (French, English) are
available free of charge from Oddo Asset Management or on its internet site www.oddoam.com. The annual and interim reports
are available free of charge from Oddo Asset Management or on its internet site www.oddoam.com. The Fund is authorised for
sale in France, Belgium, Italy and Luxemburg.
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Management team
Alain Krief
Senior Manager, Head of Fixed Income Investments
Alex Eventon
Senior Portfolio Manager, Credit
Olivier Becker
Senior Credit Analyst
3
Content
1. CREDIT MARKET OVERVIEW

2. Give me High Yield

3. Oddo Bonds High Yield

The opinions expressed in this document reflect our market expectations at the time of publication. They are liable to change depending on market
conditions, and in no way represent a contractual liability on the part of Oddo AM
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GIVE ME CREDIT
The supply-demand equi librium
Issuers are refinancing Investors are seeking out
at lower rates yield
Cumulative non-financial issues – European HY (€bn) Cumulative inflows in 2013 – European HY (€m)
2013: €75bn
Data as of February 2014
Source: Morgan Stanley. Data as of February 2014
Estimate of new issues in 2014: Significant inflows for the credit asset class in
 European High Yield: €60bn-80bn 2013:
 European Investment Grade: €500bn-600bn  European High Yield: €8.2bn of inflows in 2013
 European Investment Grade: stable in 2013
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GIVE ME CREDIT
Credit remains one of ou r strongest convictions for 2014, but managers must adapt
to a new environment
Via the portfolio management approach and fundamental research
Positioning in a rapidly evolving European HY universe
Investment Grade hedges for the High Yield market
High Yield diversification principles for Investment Grade
• European High Yield
Value remains in
• Flexible Investment Grade
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Credit curves
Spreads and rates: w here are we now?
Spread curves Yield curves
17.54
1800 18
Eur - 31/01/2014 Eur - 31/01/2014
1668
1600 Eur - 31/12/2011 16 Eur - 31/12/2011
Eur - 31/12/2006 Eur - 31/12/2006
1400 14
Hypothèse Yield 2006 + spread 2014
12.68
1200 12
1173
11.44
1000 10
d %) 9.04 8.00
a
spre 800 734 Yield ( 8 7.097.04 7.93
5.62 6.62
626 6
600 496 4.68 4.70 4.94 5.66 5.51
5.28
446 4 4.11 4.27 4.49 4.74
400 285 390 3.92 3.56
318 2.22
2.88
200 145 207 165 254 2 2.30
100
75 76 147 1.78 1.42 1.66
55 78 0
0 18 33
AAA AA A BBB BB B CCC
AAA AA A BBB BB B CCC
• Steep curves in times of crisis tend to flatten in phases of • Interest rates are at all-time lows, but the yield curve
“normalisation” remains very steep.
 Value in credit, but beware a normalisation in risk-free rates!
Source: Oddo AM, Bloomberg. Data as of 31/01/2014
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Credit curves in Europe vs US
European credit has a shorter duratio n th an US credit
Spread curves Yield curves
• Spreads rated B and CCC still offer more value in Europe than • US Investment Grade offers higher returns than European
in the US Investment Grade, but has a longer duration (6.4 vs 4.3)
• Duration is also longer in US High Yield (3.65 vs 2.9)
Source: Oddo AM, Bloomberg. Data as of 31/01/2014
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Content
1. Credit market overview

2. GIVE ME HIGH YIELD

3. Oddo Bonds High Yield

The opinions expressed in this document reflect our market expectations at the time of publication. They are liable to change depending on market
conditions, and in no way represent a contractual liability on the part of Oddo AM
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High Yield issuers
Better-known but increasingly expensive names (all-time low interest rates)
%
5 Y : 3.6 % 7 Y : 3.7 5 Y : 4.3 % 5 Y : 3.2 % 5 Y : 2.6 %
Y :
5
% %
4 9
3. 2.
Y :
5
Y :
6
%
0
4.
Y :
5
%
Y : 4. 7
4
%
3
2.
%
4
2.
Y :
5
%
5
2.
Y :
5
These securities are not investment recommendations
Source: Bloomberg. Data as of 31/01/2014
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