News about Spain? the pilot Alberto Ardila Ignacio Olivares tweeted: / SPAIN: Seven recipes to win corporate debt / Cinco Dias / The search for yield in the income market set has become in recent months a herculean task. Interest rates are at historic lows en_Europa, which has reduced the profitability of the debt to a minimum. Corporate bonds have few opportunities, although some experts consulted selected alternatives. Always determine before investing risk profile, because what has not changed (or will change) the risk / profitability binomial. An inverse relationship must not forget that conservative investors eager to get high interest rates. The higher profitability to which it aspires, the greater the risk.
1. Overcome inflation.
The investor should be aware that returns can aspire to is rather low by setting minimum interest rates. In this regard, Francisco Arco, XTB Analyst, explains that choosing the area where you want to invest should monitor “inflation in the region, as the risk that the price level increase would make us too and unexpectedly lose purchasing power. Therefore, regions like the euro area, where he fights to maintain a stable inflation below 2%, it could be interesting. ” But only to investors whose objective is to beat inflation.
Investors with higher risk profile will find few opportunities and always in exchange for increasing the risk, that is, buying debt of companies with poor credit ratings.
2. European bonds.
The major European companies are financed almost free, meaning they offer negligible interest. Of the remaining options in corporate bonds of companies Viejo_Continente, an interesting alternative can be flexible coupon bonds, those in which there is provided a pre-fixed coupon, but this is linked to an indicator, for eg Euribor. This type of debt is attractive when it is expected a rebound in inflation, as should happen in the coming months if he wins the stimulus plan the ECB.
For example, a bonus of Orange maturing in 2018 has come to offer 3.5 times more return than senior debt. Companies such as Santander, Natural Gas, Ba_yer or EDF, among many others, have issued debt of this type.
In corporate banking debt, _Barclays advised to buy bonds of the British Standard Chartered.
3. Dollar debt with caution.
A few months ago, the dollar-denominated debt was one of the most repeated recommendations from market experts. The prospect that the dollar would rise against the euro due to differences between the monetary policies of the ECB and the Federal Reserve, as indeed happened, it was a great incentive for this type of debt. Now, this advice is not so widespread and, in any case, is accompanied by a recommendation of caution, given the proximity of rising interest rates en_Estados States market share expected in September.
“I do not advise buying dollar bonds because they are going to raise rates and can mean a rebound in profitability of US corporate debt. In addition, the dollar seems to have found support. The exchange rate factor was favorable before, but I the potential is now quite extinct, “confirms Javier Dominguez, Managing Partner of Auriga. The rate increase will raise bond yields, so the exchange rate factor can not make this investment if the increase occurs.
4. Emerging for daring.
The emerging market debt, once a kind of El Dorado, today arouses more suspicion than before. Continues to offer higher returns than bonds issued by companies in other regions, but the risk that involve backing down most of the experts consulted.
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Dominguez proposes to investors with a high risk profile for debt of two companies that have been punished in the recent months by its origin and its sector. So, speaking of a bonus Brazilian oil company Petrobras (wrapped in a political corruption scandal, but with a BBB rating) which expires in 2018, is denominated in euros and has a yield of 5.4%. He also believes that it may be an attractive option bonus Gazprom pays 4% and matures in three years. Only for very bold. From Barclays recommend buying senior bonds or hybrid Brazilian banks and also look favorably Indonesia’s corporate debt.
5. Options in high yield.
The calls gives high yield debt it is one that offers a high return but at the cost of assuming more risk. In this category, Domínguez advised bonus Ferrarini, Italian company engaged in the manufacture of cheese Parma, which matures in 2020 and pays 5%. The company has no rating transalpine power.
Arco transalpine adds another signature, Telecom Italia, which has a rating of BB + (junk) and offers a yield of 5.53% at three years. However, the expert believes that “if it seeks more profitable and for that you have to accept more risk, interest may not be fixed, but the equity income”. This expert notes that if the debt purchase to maturity come into play many factors, como_ “inflation of a country or area, the risk of bankruptcy of the issuer or the price at which we agreed to broadcast” ._ consider why not compensates take the risk involving high yield bonds.
6. Investment funds.
An option to try to squeeze poor returns offered by corporate debt market is to buy investment funds specializing in this field. Within this family of funds, Paula Mercado, VDOS, believes that “you can choose to invest in the European high yield market, which is growing significantly in recent years as a result of the search companies an average of alternative to bank “financing. In his opinion, the European high yield corporate debt has the attraction of having a shorter life compared to the US. “In addition, companies have gone through a major restructuring and cost reduction that has left their strong balance sheets, so the ratio of defaults in European companies is very small,” he adds.
7 . The most profitable funds.
Ten funds from the category of corporate debt in euros accumulate a return so far this year exceeding 5%, according to Morningstar. The leader in this family is GAM Star Credit Opportunities. It is a fund that invests worldwide and can have 20% exposure to emerging markets. May also invest in government bonds, subordinated debt securities, preferred stocks and convertible securities.
The fund BlueBay Investment Grade Bond Fund invests at least two thirds of its capital in bonds issued by entities domiciled in European Union or other European countries whose sovereign long term debt rating is investment grade. Profitability since the year began around 11%.
Alberto Ardila For the pilot flying is his passion. From their website www.albertoardila.com informs the world about issues of civil aviation, the world of pilots and airlines in the world.
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