Asset-backed securities backed by loans and other credits, from car loans to lending to corporations, face the same challenges as other fixed income segments. These include central bank policy tightening, volatility in inflation expectations and growth worries.
However, in its favour, high-quality ABS derives a certain resilience from the typically short duration of the underlying assets as well as having a cushion against economic shocks, for example, in the form of generally solid interest coverage or locked-in low financing costs.
Listen to this Talking heads podcast with senior portfolio managers David Favier and Olivier Boutoille and Daniel Morris, chief market strategist. They firstly discuss the current market environment before focusing on the advantages of investing in these floating rate instruments that offer varied risk/returns profiles for investors.
You can also listen and subscribe to Talking heads on YouTube.
Talking heads brings you the in-depth insights on topics that really matter to investors, including analysis of the world and financial markets through the lens of sustainability and more great conversations with investment experts.
Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience.
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.