[CONTENU PARTENAIRE] 2025 should follow in the footsteps of 2023 and 2024, two excellent years of performance for High Yield bonds. At current yield levels, dated funds are a type of product that must retain a prominent place in wealth allocations. Interview with Guillaume Truttmann, High Yield Manager.
How do you characterize and evaluate the High Yield market at the moment?
The market for High Yield emerged in the 1970s when American companies no longer had access to bank financing due to a lack of sufficiently solid balance sheets. Also appeared the first fallen angelscorporate bonds downgraded from their rating to the “ Investment Grade “. They then switched to category High Yieldalso called High Yield. Then in the 1980s, the first LBOs in the United States financed by bonds High Yield emerged, with for example an emblematic operation of this period, the acquisition of RJR Nabisco by the KKR fund. Until the end of the 2000s, bonds High Yield have been described as “Junk Bonds”. At the time, the market High Yield in the euro zone weighed around 50 billion euros with issuers mainly rated B on a scale going from BB+ to C. At the end of the Great Financial Crisis, the market expanded significantly to reach nearly 450 billion in the euro zone. euro. The market has gradually become mature and deeper, with the credit quality of issuers greatly improving.
Who are the transmitters High Yield today and what is the interest for the investor?
In reality, they have been the same profiles since the beginning, namely small growing companies, fallen angels and companies under LBO. The market has become structured and normalized, in the sense that the era during which High Yield bonds were qualified as junk bonds is over. It should nevertheless be kept in mind that this higher yield is synonymous with a higher risk of default among these issuers, with rates amounting to 2.6% on European High Yield (see JP Morgan October 2024). My advice to take advantage of it without being forced to follow your investment day by day is dated (or maturity) funds. The rise in central bank rates has propelled yields on government and corporate bonds to levels that had not been reached since the beginning of the 2010s. This asset class, neglected since then by wealth advisors , regains interest among private clients. It indeed offers positive real returns, excellent liquidity and constitutes an alternative solution to the fears that the real estate market and the valuation of SCPIs may currently give rise to.
Private clients are not as well educated about bonds as they are about stocks, although in reality it is not a very complex instrument. The year 2022, certainly marked by the rise in rates, also saw traditional bond funds suffer from negative performance (-10% to -20%). Consequently, offering a dated fund responds to two issues for wealth management advisors: it allows them to have a product to seize the opportunity of high rates but also to rely on a strict management framework with a risk decreasing rate throughout the life of the fund, and thus reduce the risk of reliving an episode similar to 2022.
Faced with a plethoric Unit of Account offering from insurers, how is the dated fund positioned?
It can act as a diversification support alongside the Euro fund. The dated fund will make it possible to crystallize a return and depending on the risk profile, to add a pocket of complementary bond yield to the Euro fund. To do this, in our opinion, we must favor a dated fund composed of High Yield bonds, or High Yield.
What solutions does Eiffel Investment Group offer?
As a market specialist High Yieldlast year we launched Eiffel Rendement 2028. This fund draws on the historic expertise of Eiffel Investment Group in bond management, which has been investing in the asset class since 2009. Thanks to an experienced team of 4 managers analysts, the fund has selected more than 100 different issuers to offer a return to maturity, gross of fees, greater than 6% (source Eiffel Investment Group at 11/15/2024). Diversification obviously plays a key role in achieving performance objectives. Eiffel Rendement 2028 is thus invested in a wide selection of corporate bonds, denominated in euros and whose maturity does not exceed December 31, 2029. It aims to generate yield via a carry strategy and active risk management. and rigorous. As of October 31, 2024, the Retail portion of Eiffel Rendement 2028 shows a performance of 6.21% since the start of the year and 14.15% since its creation. Eiffel Rendement 2028 is available to investors until December 31, 2024. More broadly, Eiffel Investment Group continues to expand its range with the “evergreen” fund. Eiffel High Yield Low Carbon and very soon a new dated fund.
In partnership with Eiffel Investment Group
