Pension investment giant urges schemes to cut corporate bond exposure

Towers Watson, one of the UK's largest pension fund investment consultancies, has issued a stark warning to clients urging them to consider reducing their exposure to corporate debt.

The assertion follows the firm's downgrading of investment grade corporate credit spreads to "moderately unattractive" over a three-year horizon from "neutral", as revealed in its Global Markets Overview for July and the first half of 2014. The firm said it had become "more cautious" in its outlook for returns from high-grade credit over over three to five years, although it still expects returns for credit to remain "reasonable" over the short term. The decision to downgrade was the result of "below average" compensation for liquidity and credit risk in corporate credit, based on its...