GAM's Reece: How credit derivatives can help support bond fund performance

Relative value strategies useful

Darren Reece, corporate bond manager on GAM's Absolute Return Bond Strategy, says credit derivatives are becoming increasingly important when it comes to adding value in the corporate bond market.

While talk of disappointing returns seems to be flavour of the month, the rout afflicting the corporate bond market begun over a year ago, as the tumbling oil price triggered a wave of defaults within the US energy sector and drove yields from a historic low of 5.6% in June 2014 to almost 12% today. Looking forward, company fundamentals will be a more significant driver of bond performance, as fund managers are forced to navigate more volatile conditions and potential outflows from the sector. Can this specialist bond fund complement sector giants? In such an environment, relative v...