Fraser Lundie, Hermes’ co-head of credit, and manager of the fund – as well as the firm’s £200m Global High Yield Bond strategy – stresses that the more risky end of the spectrum “ticks all the boxes” from a multi-asset point of view.
“Investors are looking for yield in a low-yield world and they are looking for something that is not particularly correlated to rates or equities, and that’s truer in high yield than in other assets with lower correlation over the long term,” he explains.
“Investors also want something that’s liquid. There are not so many asset classes out there that can tick those boxes, and therefore as we move towards more of a multi-asset world what used to be constrained as a smart benchmark-type allocation to high yield – maybe at 2% to 3% – is now whatever you think is appropriate”.
It would appear that wealth managers have more freedom than ever to exploit opportunities across the credit spectrum, but this means carrying out due diligence on a variety of very dissimilar funds.
But if there really is a bubble in the making, there’s not much anyone can really do to stay protected accept avoiding the asset class altogether.
