Video: How to avoid credit investing mistakes as rates rise and the geopolitical crises escalates
The following was produced and published by Livewire on 22 April 2022.
“Get back to basics” and “Don’t make mistakes” – easily said, often difficult in practise. But they’re key for credit investors seeking to navigate the current market volatility.
Against the backdrop of geopolitical and economic upheaval fuelled by the war in Ukraine and rising inflation, the US Federal Reserve has lifted rates for the first time since 2018: “Many things are changing but some things aren’t,” said Teiki Benveniste, Head of Ares Australia Management.
“Don’t make credit mistakes and minimise defaults in your book of credit assets. And if you can’t avoid them, get as much capital back as you can,” he says.
What’s changing? We’re seeing wider dispersion between fixed-rate, floating-rate, liquid and illiquid, and investment-grade and sub-investment-grade credit asset classes, says Benveniste.
What’s not changing? He doesn’t expect a rush of defaults or a broad-based selloff in credit and views the fundamentals as sound, particularly in the US, where corporate balance sheets are strong and unemployment is at historic lows.
In the interview above, Benveniste explains what the above dynamics mean and how to optimise your fixed-income exposures in this environment.
Disclaimer – Fidante Partners
Fidante Partners Limited ABN 94 002 835 592 AFSL 234668 (Fidante), a member of the Challenger Limited group of companies (Challenger Group), has entered into arrangements with Ares and Ares Australia Management Pty Ltd ABN 51 636 490 732 (AAM), in connection with the distribution and administration of financial products managed by Ares or AAM. In connection with those arrangements, Fidante or AAM may receive remuneration or other benefits. Neither Fidante nor AAM nor any of their associates are responsible for the information in this material, including any statements of opinion and accept no liability whatsoever in relation to it. AAM is an Authorised Representative No. 001280423 of Fidante and is in the process of seeking its own Australian Financial Services Licence. Ares is exempt from the requirement to hold an Australian Financial Services Licence. Ares is subject to regulation by the Securities & Exchange Commission of the United States of America under US laws, which differ from Australian laws. This publication is only made available to ‘wholesale clients’ or ‘sophisticated investors’ under the Corporations Act 2001 (Cth) in Australia. Fidante is not an authorised deposit-taking institution (ADI) for the purpose of the Banking Act 1959 (Cth), and its obligations do not represent deposits or liabilities of an ADI in the Challenger Group (Challenger ADI) and no Challenger ADI provides a guarantee or otherwise provides assurance in respect of the obligations of Fidante. Investments in the Fund(s) are subject to investment risk, including possible delays in repayment and loss of income or principal invested. Accordingly, the performance, the repayment of capital or any particular rate of return on your investments are not guaranteed by any member of the Challenger Group.