Corporate bonds: riding the interest-rate tailwind
The turnaround in interest-rate policy in 2022 has triggered a renaissance for fixed-income investing. Euro-denominated investment-grade corporate bonds are a key component of many portfolios.
Under this new capital market regime of higher inflation and growth, elevated (real) interest rates and greater volatility, investing in a diversified range of carefully selected investment-grade corporate bonds can offer an interesting opportunity/risk profile. At Union Investment, we use an active, fundamental management approach in order to seize opportunities and address risks.
Since the monetary policy environment changed in 2022, corporate bonds have become more attractive again. In Union Investment’s Credit team, the focus is on bottom-up security selection.
Michael Schiller answers three questions on corporate bonds
Video interview with Michael Schiller, Group Head of Fixed Income Credit at Union Investment and focused on EUR corporate bonds
Why investing in euro corporate bonds with Union Investment is a good idea
Pooled expertise
At our Frankfurt office, we have a large euro credit investment team compared with competitors around the world. Thanks to our long-standing experience and international expertise, we are a reliable partner with excellent market access.
- 1 As at march 2023.
Proprietary research application
Our global credit platform (GCP), which we developed inhouse, comprises more than 65,000 bonds globally. In addition, around 1,950 issuers are covered directly by our proprietary research through the GCP. 1
A stable, experienced team
In terms of size and experience, our euro credit team is broad-based and stable. Its members have an average of 17 years’ investment experience and have, on average, been with our company for more than ten years.1
Investment objectives and approach
Fundamental, active and risk-controlled investment approach
We pursue an active, fundamental management approach. Our aim is to use a combination of bottom-up security selection and occasional targeted top-down decisions to earn attractive, risk-adjusted returns. Our focus is on spotting signs of rating downgrades and defaults in a timely manner.
An integrated, data-driven investment process
Under our integrated investment process, our portfolio managers are responsible for both research and portfolio construction. They can draw on technical support from our global credit platform, which aggregates more than 40 million data records from 20 external and internal research data sources across issuers, securities and markets on a daily basis. At the same time, the global credit platform serves as a central research and communications channel within the Credit team and as part of the wider fixed-income platform.
Integration of ESG criteria
Under our investment approach, we attach great importance to analysing ESG factors as part of our fundamental research. Since 2013, our sustainable investment research information system (SIRIS) has been pooling comprehensive data from external research providers and inhouse analysts. The intelligent platform enables our portfolio managers to assess the opportunities and risks of individual securities and entire portfolios.
Key opportunities and risks of euro corporate bonds
Opportunities
- Attractive yields in the international corporate bond markets
- Higher return than on investments in safe-haven bonds
- Diversification
Risks
- Market-driven price volatility and income fluctuations as well as credit risk of individual issuers/counterparties
- Investments in high-yield securities may entail heightened price volatility and default risk
- Illiquidity of assets
Are you interested in corporate bonds? How can we help you?
Your contact person
If you have any questions or would like to obtain further information, please find your dedicated contact below.
