What's more important than finding balance and stability in today's world?
In an environment of diminishing yields and rising risks, Allianz Global Investors (AllianzGI) delivers investment solutions that aim to combat the trend to hunt for better income strategies at measured risks.
Reasons to seek income opportunities
Maintain purchasing power in the zero-rate era?
The US Federal Reserve has cut interest rates again and relaunched large-scale asset purchases. Major central banks in Europe and Japan are also leaning towards monetary easing policies. Global interest rates are therefore dipping into muted levels or even negative territory. Without question using traditional approaches to obtain stable income will become more difficult. In a persistent low interest rate environment, the value of cash will be eaten away by inflation over time. So how should we preserve our purchasing power?
Avoid interest risks amid market vagaries
Black-swan events such as the Sino-US trade disputes and the coronavirus pandemic tend to increase market volatilities. Social distancing and lockdown measures across the globe have brought economic activities to a grinding halt, potentially triggering the fastest and deepest recession ever in US history. Under the clouds of uncertainty, how should investors lower risks when hunting for yields?
Identify income opportunities as growth slumps
The current economic expansion began over a decade ago and is entering the final phase. With the coronavirus spreading around the world, a global economic slowdown is inevitable. It doesn’t matter whether one is investing in developed or emerging markets, there will be challenges. The outlooks on different geographical economies and asset classes are set for massive changes. How can we seize growth opportunities and identify potential income sources that are sustainable?
Hunting for Income – 6 rules
The current economic expansion is at its tail end, while interest rates remain low and market volatilities have shot up due to uncertainties. Is there a way to enjoy the best of both worlds, meaning to capture relatively high potential return without having to take too much risk? Our 6 rules on income investing can accompany your hunt for income journey under the changing market conditions.
Include different asset classes in your portfolio helps increase the chances of earning potential income in a low interest rate environment.
AllianzGI’s income and growth investment team members are all experts in different areas, for example, Income and Growth, High Yield, Convertible and Short Duration High Income. Working together for many years, they have developed a strong bond and understanding of one another. They also achieve work-life balance. Sharing the same goals, values and beliefs, they make the best team!
The five core members
AllianzGI’s income and growth investment team is led by five core members (from left): David Oberto (high-yield bond expert), Michael Yee (stock and option expert), Doug Forsyth (CIO US Income and Growth Strategies), Justin Kass (convertible bond expert), William Stickney (high-yield bond expert).
Established 24 years ago, the close-knit team has developed strong understanding and solidarity between members. The lack of changes in the constitution of the team over the years has helped maintain the stability of its investment policies and decisions, an advantage among its peers.
Build innovative income strategies with tacit knowledge and close collaboration
With expertise across all major asset classes, the team can systematically integrate the investment processes of high-yield bonds, convertible bonds, and stocks into a cohesive, effective strategy. Thanks to active information sharing and good tacit understanding, the team can fully deploy the expertise of different members when it comes to decision making. That helps boost the performance of the portfolio, which can be both aggressive and defensive.
Strive for work-life balance and common goals
The financial services industry is fast-pace. AllianzGI’s income and growth investment team is based in San Diego, meaning that they can also accommodate New York’s trading hours. The flexible work hours enable all team members to spend time with their friends and their families.
Aside from work, the income and growth team members also exercise together in their spare time. They share common topics. They all love hockey and often practise together. They have participated in competitions as a team and won numerous awards.
Making diversity a priority
Members of the income and growth investment team get along extremely well both at work and in spare time. The strong bond and mutual understanding they have developed have given them strength to handle the ever-changing financial market. Each member plays a different yet complementary role.
The investment team has grown over the years to become one with vision, discipline, and strategy. With tremendous experience, they are mentally trained to handle market vagaries and challenges.
Visionary and with a long track record of performance
AllianzGI’s income and growth team not only emphasises teamwork, but also individual expertise. Their division of labour is clear and meticulous, which helps prepare them for abrupt changes in the market.
The team not only focuses on their asset management performance, but also has to respond to different demands from investors. They have gradually moved from focusing on a single asset class to a multiple-asset income growth strategy. With team spirit, they are ready to move with the times and step into the future!
Within the range of various structures, preferred securities offer different coupon structures which can be leveraged to manage different interest rate environments.
Where preferred securities sit in the issuer’s capital structure, their history of low defaults and the dominance of the banking sector across the preferred universe could be a considerable investment opportunity that preferred securities may provide higher quality income potential.
An unconstrained global strategy has the ability to rotate risk between these themes to target a potential positive outcome regardless of the market environment.
Traditional benchmarks suffer from inherent deficiencies such as market-cap weighting construction and an over-reliance on credit ratings. A flexible approach can take advantage of these inefficiencies and avoid being a forced seller or buyer of securities at inopportune times.
Ms Mona Mahajan, US Investment Strategist, was invited to share Allianz Global Investors’ interpretation of the current situation on macro-economic impact of COVID-19, global monetary policies and fixed income markets, and the effect on key high yield investing.