BNY Mellon Investment Manager Says Global Macro Risks Have Diminished and Securities Selection Becomes Increasingly Important
NEW YORK and LONDON, February 26, 2013 — High yield bonds, global corporate bonds and emerging market debt are among the areas of opportunity for fixed income investors in 2013, according to Standish Mellon Asset Management Company LLC, the fixed income specialist for BNY Mellon.
Standish's observations recently were published in Security Selection and Liquidity Key for Bonds in 2013, Standish Global Bond Market Outlook.
The report notes that Standish believes global macro risks have diminished over the last year. "Hopefully, we are moving from a market dominated by fear to one where fundamentals once again drive returns," said David Leduc, chief investment officer for Standish and the author of the report.
The report cautions, however, that returns are likely to be lower for fixed income in 2013 than they were in 2012. It cites the potential for rising inflation. It also notes that current low yields could significantly reduce the potential for capital appreciation.
Standish expects global growth will be muted in 2013 as developed economies continue to deleverage and inflation remains in check. This would normally provide a favorable environment for fixed income investments. However, Leduc added, "We believe valuations have become stretched in a number of sectors, so investors will need to be in the right sectors and in the right securities. An important driver of excess returns will be security selections within the sectors."
One factor expected to drive emerging market local currency debt will be strengthening in some Asian and Latin American currencies as better economic fundamentals attract capital, according to the report. In global corporate credit, Standish said it favors high yield over investment grade bonds, as there appears to be less room for price appreciation because of economic fundamentals.
Standish also said some sovereign debt in the European periphery could provide opportunities, as the European Central Bank has taken steps to reduce the possibility of a eurozone breakup.
Other areas, such as U.S. Treasuries and German bunds, could become more vulnerable to inflation, the report said. Standish notes that the inflation threat to these investments could rise as investors begin to anticipate more stable economic activity in the second half of 2013.
Standish Mellon Asset Management Company LLC, with approximately $167 billion as of January 1, 2013 (all other BNY Mellon AUM numbers are as of December 31, 2012) of assets under management, provides investment management services across a broad spectrum of fixed income asset classes. These include corporate credit, emerging markets debt (dollar-denominated and local currency), core / core plus, tax–sensitive, short duration, stable value and opportunistic (U.S. and global) strategies. Standish also offers full service capabilities in insurance client strategies and liability driven investing. The firm includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation and The Bank of New York Mellon and Alcentra NY, LLC personnel acting as dual officers of Standish.
BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 36 countries and more than 100 markets. As of December 31, 2012, BNY Mellon had $26.7 trillion in assets under custody and administration, and $1.4 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.
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