207. Why now is the time to be selective and different in the high yield bond space

Man GLG fund manager Mike Scott explains why credit spreads* are the major driver of returns in the high yield bond market and the importance of not only being selective, but also different, in choosing companies amid a weaker economic backdrop. He also highlights the role of cash flows in this environment and the focus on targeting businesses with recession proofing characteristics over a number of cyclical names. Mike also addresses the role of inflation in the high yield bond space and the performance of the US energy sector.
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What’s covered in this episode:

  • Why credit spreads are the major driver of returns for high yield bonds
  • The importance of the underlying credit quality of a business in this environment
  • The need to focus on cash flows, particularly in uncertain times
  • The robust state of the US energy market compared to recent history
  • Targeting recession proof businesses over cyclical credits and the importance of being selective in this environment
  • Businesses that can flourish or flounder in an inflationary backdrop

*Credit spread refers to the difference in yield between a government and corporate bond of the same maturity. 

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