The team at Mazars has sent over its latest rebalance for Asset Allocator’s perusal and, among other things, they have decided to change the source of their fixed income risk.
Chief investment officer Ben Seager-Scott and team have sold their high yield exposure in favour of local currency emerging market debt, to better reward their investors for the risk they’re taking.
Seager-Scott said most local currency emerging market bonds have a higher credit rating than their high yield counterparts, and pay better yields too.
"When you're looking at high yield, you've got to look at the credit spread," said Seager-Scott. "And the credit spreads are very tight, and have been getting tighter over the last year or so, and that is your compensation for taking the additional risk that these companies default."
What this translates to in practice is taking a 4.5 per cent position in the Invesco Emerging Markets Local Debt fund, which uses bonds from Columbia, South Africa, and Turkey in its three largest positions.
Mazars is not the only allocator to use this mandate – several months ago we covered Abrdn's purchase of it.
What else?
Mazars has joined Quilter in the ranks of those selling off their gold profits as the precious metal continues to rally around its all-time high.
As gold is so hard to value in relation to anything, Seager-Scott says his preferred method is to monitor who’s buying it.
“The way I look at it, central banks are relatively price insensitive,” he said. “They’re not buying it to make a profit. They’re buying for other reasons. But even I think price-insensitive buyers still have a point at which they’re likely to say, ‘this is quite expensive’.
He added that China has not been buying gold since April, which he sees as a sign that demand is falling. Gold of course produces no yield, so its price is driven by demand, or ‘Fomo’, as he put it.
Asset Allocator recently covered this year’s rally and the ways in which allocators get exposure to the precious metal, besides the signet ring on their pinkie finger.
