Canada Life's Arnaud: Rising star bonds offer strong opportunity to outperform

Consumer goods among targeted sectors

Canada Life Asset Management is targeting the commodity-linked, consumer goods and automotive industries to take advantage of the rebound from the coronavirus pandemic, as last year's fallen angels transform into rising stars and regain their investment grade status.

As a result of 2020, a record number of firms were downgraded to high yield status, resulting in a wave of fallen angels, or issuers which are "not meant to stay in high yield markets", according to senior fixed income fund manager David Arnaud. The fallen angel opportunity as previously strong credits suffer "Last year, the rating momentum was extremely negative as there was a lot more downgrades than upgrades, especially in the first half of 2020," the manager explained. "But this has turned and we are starting to see upgrades actually outpacing downgrades, and this is a very pos...