Where next for fixed income?

by | Jul 19, 2023

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IFA Magazine’s latest ‘Meet the Managers’ webinar held in May, explored the threats and opportunities in today’s fixed income markets: a panel discussion with M&G InvestmentsBen Lord, Eva Sun-Wai and Gregory Smith assessed the current market conditions and outlook for the sector.

In May, IFA Magazine held a live webinar for readers to zoom in on the fixed income markets and the threats and opportunities facing fixed income investors.

We had a very positive response from viewers on the day but that was really no surprise to us at IFA Magazine. Fixed income is attracting lots of positive reader and investor attention at the moment, so in this summary we’ve just highlighted some of the core discussions as well as providing readers with the opportunity to hear the full conversation for themselves by downloading the recording of the hour-long event.

 
 

The good news for advisers is that, based on the consensus views shared by our three excellent fixed income experts from M&G Investments who formed our panel for the live webinar, the answer to that question is that there really is plenty to be getting excited about when it comes to fixed income investing. And that’s despite the considerable economic uncertainty that persists.

Our thanks go to all three of our panel, Ben Lord, Eva Sun-Wai and Gregory Smith for so candidly sharing their views and analysis during the fixed income conversation with IFA Magazine’s Alex Sullivan and Sue Whitbread.

The state of the global economy

The panel shared their thinking and insight not only about the state of the global economy (spoiler alert – it’s uncertain!) but also the outlook for fixed income and how and why they’re positioning the asset allocation of their funds in the ways that they’re doing at the moment.

 

As Ben Lord said during the conversation, when asked about the big ‘macro’ picture, the position with the global economy, ‘it’s a highly volatile highly uncertain period’ as the markets are having a very big debate. Lord reminded listeners that ‘monetary policy works with a lag, and that in his view, we will soon witness ‘the expiry of that lag in terms of real economy reaction’. He also pointed out the constant ups and downs of news flow, with potentially positive signs closely followed by more negative data adding to the uncertainty tor investment managers.

Eva Sun-Wai reminded listeners that the convergence period is pretty much at an end and that more divergence is likely to be the theme from here on. She expects different Central Banks to be doing very different things in terms of monetary policy – pointing out that their economies are at a different point in the cycle. Inflation, especially core inflation as she points out, continues to be sticky, especially in the UK, and is a factor which typically can cause headaches for fixed income managers as it can lead to such volatility in pricing.

Interestingly, Gregory Smith described it as follows: ‘we’ve got different gears in different places? Continuing, he said “in 2023, we’ve got weakness in the Eurozone and the US, we’ve got the potential for recession in mismanaged economies like the UK, but we have spectacular growth in other areas of the globe such as emerging markets and developing countries which are going to be the drivers of growth this year and where there is a real vibrancy”.

This all points to the fact that market volatility can throw up real opportunities for those with a global mandate and who have the resources and scone to identity where real vale exists for investment in fixed income securities.

A focus on fixed income

Alex Sullivan then invited the panel to drill down into the detail of fixed interest markets, to share their views and their individual outlook for the sector.

The panel shared their insight into where they see value in government, corporate and emerging market bonds as well as more broadly across the fixed income spectrum. However, they didn’t shy away from the potential risks which are out there at the moment.

Interestingly, the conversation showed quite clearly that, for active fund managers such as M&G’s, the volatility and uncertainty in markets can provide real investment opportunities. There is scope to buy on weakness for those investors who know where to look and have the research capabilities to identify value situations.

As Sun-Wai said “the appeal of fixed income at the moment is really interesting. It’s very widespread – not just in govt bonds but also in credit markets too. In our global funds were also seeing opportunities in emerging markets as Greg has said.”

At M&G, the panel made it clear that the breadth and depth of resource they have in terms of fixed income and credit research is considerable, and is a major contributor to their success as a team both now and for the future.

Check out the full conversation

Missed it? No problem: IFA Magazine readers can catch up with all the details of the webinar by accessing the recording here.

About Ben Lord

Ben joined M&G in 2007 and was appointed manager of the M&G Global Corporate Bond strategy when it was launched in September 2013. Ben also manages the M&G UK Inflation Linked Corporate Bond strategy and co-manages the Corporate Bond and Strategic Corporate Bond strategies. Before joining M&G, he worked at Gordian Knot as a credit analyst covering global financial institutions. Ben obtained an MA (Hons) from the University of Edinburgh and is a CFA charterholder.

About Eva Sun-Wai

Eva became the lead manager on M&G’s Global Government Bond strategy and deputy manager on the Global Macro Bond strategy in January 2021. Since September 2019, Eva had been a junior macro fund manager in the Wholesale Fixed Income team. She joined M&G in 2018 on the Investment Graduate Scheme, rotating across several business areas including emerging market debt, corporate credit research, real estate and long-term investment strategy. Eva has a BSc (Hons) Economics degree from the University of Birmingham, has obtained the IMC and Financial Services Level 6 qualifications and is a CFA charterholder.

About Gregory Smith

Gregory has over 20 years’ experience working on emerging and frontier markets. He is a senior EM Sovereign strategist and deputy fund manager of the M&G (Lux) Emerging Markets Hard Currency Bond Fund. Prior to joining M&G in January 2020. he was at the World Bank for 7 years as a senior economist and sovereign debt advisor. At the World Bank he did stints covering East Asia and Africa, with time spent in Mongolia, Vietnam, Ghana, Zambia, Cameroon and Gabon. He began his career on the Overseas Development Institute’s fellowship scheme, working as an economist in the Ugandan finance ministry. Gregory holds a PhD in Quantitative economics from Nottingham university. Greg holds the Certificate in ESG investing (CFA UK).

Click here for more information about M&G Investments

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