Asset Class Research
Aegon Asset Management publishes 2017 Responsible Investment Report
The report outlines our approach to responsible investment across policy, governance, ESG integration, engagement & voting, and impact investment. It demonstrates our commitment to integrating environmental, social and governance factors into our investment decision-making, and our support for sustainable finance.
Short Duration: Why now?
Asset Class Research
2018 High Yield Outlook
We are constructive on high yield market fundamentals and expect a 4% to 6% return despite rising rates. Many of the factors that benefited high yield securities in 2017 remain in place and should be supportive over the coming year.
Tighter Spreads Disguise Wider Opportunities
As an asset class, high yield corporate debt looks expensive. Whether its Ba or Caa-rated, junk bond spreads have compressed inside long-term averages. For some, these spreads are taken as a sign that the high yield market is fully valued, and devoid of investment opportunities. But despite the steady, low volatility, and persistent drive towards tighter credit spreads and lower yields, there is meaningful turbulence beneath the surface.
Private Equity Energy—Event-driven Volatility History
Historically, event-driven volatility created corresponding investment opportunities. Today's opportunity set shares similarities with the past, thereby indicating why today may represent one of the best of times for new capital allocations into upstream oil and natural gas investments. In this article, we highlight historical events, with particular regard to actions taken by the Organization of Petroleum Exporting Countries (OPEC), that generated supply shocks and oil price volatility, and presented investors with opportunities.
Private Equity Energy—The Best and Worst of Times
The construction lending market currently provides exciting opportunities for non-bank participants, like life insurers and private-equity investors. However, there are economic forces at work with potential to increase construction costs significantly. Therefore, it is critical market participants fully understand the cost environment.
High Yield Outlook—Second Half 2017
On balance, while we have reduced our unemployment, inflation and interest rate forecasts, we still think GDP should accelerate in 2017 relative to 2016. Despite a modest start to the year, wage growth is likely to slowly firm up as the labor market continues to improve. However, we are cognizant of potential downside risks, especially in industry activity, should bouts of political and economic uncertainty dampen optimism and discourage investment.
High Yield and Rising Rates
After raising the federal funds rate rate twice since last December, the Federal Reserve is forecasting approximately two more rate hikes this year. At present, financial markets are anticipating the same. Our view is that the FOMC will hike twice in 2017, three times in 2018, and twice in 2019, putting us below the market’s expectations today, but 50 basis points higher than the market through 2019.
Opportunities in High Yield
As an asset class, high yield corporate debt looks expensive. Whether its Ba or Caa-rated, junk bond spreads have compressed inside long-term averages. For some, these spreads are taken as a sign that the high yield market is fully valued and devoid of investment opportunities. But despite the low volatility, and persistent drive toward tighter credit spreads and lower yields, there is meaningful turbulence beneath the surface and idiosyncratic opportunities are on the rise.
Leveraged Loans—Why Now?
Nothing is stable in financial markets. Recently, perhaps the steadiest ground has been the prevailing low interest rate environment since the financial crisis; it was seemingly the one thing investors could count on. Yet, eventually the economic ground will begin to shift, and central banks responding to data will have to accept, if not encourage, higher interest rates. Is now the time to hedge against rising rates with floating-rate securities?