“We are looking at a situation where oil prices will benefit the US and UK economies and unemployment will continue to fall,” he said. “There are no headwinds.”
“Compared to Europe, the UK and US are cheap – that is where we are finding value, and we are skewing our portfolio away from European credit into UK and US where there are attractive opportunities.”
This view translates into UK and US corporate credit weightings of 24.9% and 23.4% respectively (as at 31 July), as well as 22.82% in financials and 9.49% in consumer services.
Woolnough also favours investment grade and high yield – particularly the US market.
“High yield in the US and Europe are very different,” he expanded. “European high yield spreads are tighter than they should be because of QE, while US high yield spreads are slightly wider than they should be from being distorted by around 15% of the index being in energy.
“As long as the Federal Reserve and Bank of England put interest rates up and we do not see recession then it is great news for high yield.
“We are also like investment grade; there is fair value in investment grade and great value in US investment grade.”
