miércoles, 7 de marzo de 2018

miércoles, marzo 07, 2018

What Investors Are Missing in Junk Bonds

High-yield market has gotten more diversified but many investors are stuck with old, U.S.-heavy indexes

 

GLOBAL GROWTH
Face Value of ICE BofAML High Yield bond index
 
 
In years past, if investors wanted to buy junk bonds, they bought U.S. high-yield corporate bonds: there was pretty much no alternative. The high-yield world is now full of companies from fast-growing parts of the world, yet many investors are missing out.

Take the ICE BofAML Global High Yield index. At the start of 1998, it contained bonds from companies in just 15 geographies, with the U.S. accounting for 87% of the index, notes fund manager Hermes Investment Management.

Now, the index is home to hard-currency debt issued by companies from 81 countries, and only 52% comes from the U.S. Debt from Russia, Brazil, China and Turkey accounts for 13% of the index. Along the way, the index has grown 10-fold to more than $2.1 trillion.
 
Investors should benefit from shift. They get diversification and faster economic growth, which typically benefits high-yield bonds. Since global growth picked up, emerging market bonds have beaten U.S. and European peers. And on average they have slightly higher credit ratings than the U.S. high-yield index.

The International Monetary Fund forecasts growth of 4.9% this year and 5% next for emerging market economies, far above the 2.3% and 2.2% forecasts for the advanced economies.

The problem is many investors are missing out. Popular junk-bond exchange-traded funds, like the SPDR Bloomberg Barclays High Yield Bond ETF  and the iShares iBoxx High Yield Corporate Bond are still heavily concentrated on the U.S. market.

With yields extremely low on high-yield bonds, investors are taking lots of risk in the sector. A bit of global diversification might be a good idea right now.

0 comments:

Publicar un comentario