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Text on screen: Tina Adatia, Fixed Income Strategist
Tina Adatia: Andrew. What's your highest conviction view?
Text on screen: Andrew Balls, CIO Global Fixed Income
Andrew Balls: Well, I think my highest conviction view is wanting to have diversified sources of carry in the portfolio, allocating risk in a diversified way, not having too much exposure to any one sector.
Text on screen: High conviction view #1: Mortgages and housing-related assets
Image: Overhead view of a neighborhood with houses.
I think mortgages, US Agency mortgages, non-Agency mortgages, generally housing-related assets in the UK and elsewhere. I think that sector still has good risk/rewards. So in global portfolios, that's where a good part of our risk budget will be allocated.
Tina Adatia: And Joachim, what's your highest conviction view?
Text on screen: Joachim Fels, Global Economic Advisor
Joachim Fels: Well, everything that Andrew said, and I'll just throw in
Text on screen: High conviction view #2: Private credit strategies
Image: Joachim Fels on the trade floor and computer screens
private credit strategies, because in the public markets, both in credit but also in equities, valuations are pretty high. They have received a lot of support, direct or indirect from central banks. But I think private strategies, that's the area where you can still benefit from the many dislocations that were created by this crisis. It means that investors have to have a more patient approach, a more longer-term approach. But I think that's really where you can still harvest some premia, which are increasingly no longer available in the public markets.
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Please note that the following contains the opinions of the manager as of the date noted and may not have been updated to reflect real time market developments. All opinions are subject to change without notice.
All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee, there is no assurance that private guarantors will meet their obligations. U.S. agency mortgage-backed securities issued by Ginnie Mae (GNMA) are backed by the full faith and credit of the United States government. Securities issued by Freddie Mac (FHLMC) and Fannie Mae (FNMA) provide an agency guarantee of timely repayment of principal and interest but are not backed by the full faith and credit of the U.S. government. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Diversification does not ensure against loss.
Private credit involves an investment in non-publically traded securities which may be subject to illiquidity risk. Portfolios that invest in private credit may be leveraged and may engage in speculative investment practices that increase the risk of investment loss.
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