High yield and convertible bonds are some of the key opportunities for the Allianz Income and Growth – I (H2 – EUR) – EUR strategy this year, says Allianz Global Investors.
The fund managed by + rated Doug Forsyth, fetched $6.78 billion in net flows during 17 February 2017 to 18 January 2018, data from Citywire Discovery showed.
It invests hugely in the US and Canadian corporate debt and equities. The assets are split between equities or equities securities (33.5%), convertible bonds (33.3%) and high-yield bonds (33.2%).
In an interview with Citywire Asia, a company spokesperson said that under a rising rate environment, high-yield bonds tend to hold up better than other types of bonds, particularly when compared to Treasuries and investment grade credits.
‘Given its reduced sensitivity to interest rates, high-yield bonds can provide good diversification and compelling risk or reward balance in a portfolio.’
Similarly, convertible bonds track equities more closely and have a low correlation to interest rates historically, while performing well during rising rate periods.
This year the US economy is expected to expand at a moderate pace due to favourable economic environment.
Allianz said the impact of tax cuts, progress toward an infrastructure spending bill and continued deregulation efforts could result in even stronger US growth.
‘US monetary policy continues to be modestly accommodative with the Fed and designated new chair Jerome Powell expected to take a gradual approach toward policy adjustments.’
Moreover, the additional interest rate hikes and balance sheet reduction efforts would signal confidence in the US economy's ability to grow.
‘Over 2017, we managed to expand our distribution footprint across different channels, from retail banks to private banks and the insurance segment. We are also seeing strong flows from HNWIs in Asia, particularly from Hong Kong and Taiwan,’ it added.