BlueBay’s Justin Jewell and Andrzej Skiba, who manage BlueBay’s Global High Yield ESG Strategy, tell us about their outlook in an uncertain world
What is shaping your big picture of investment markets?
Justin: The outlook going forward hinges on two things: first how the recovery continues - and that's part medical including vaccine rollout and part economic. Second, policy makers' willingness to extend schemes if it takes another 3, 6, 9 months to get through any issues.
Our broad view is that policy makers, particularly monetary policy makers, remain very much on side and we also expect to see medical progress: therefore, for the most part, we'll likely continue to see recovery. But there may be cross winds and sectors where recovery takes time, or is a bit uneven, or just doesn't happen because consumer preferences change.
Can you pick out a key dynamic in post-pandemic markets?
Andrzej: What we're experiencing right now is investors adapting to a world of near zero interest rates. With investment grade assets trading at the lowest yield in years, there is significant investor willingness to extend credit to high yield companies that might be going through temporary disruption but offer relatively attractive yields - provided those companies are expected to survive.
What features of this new market environment might play to BlueBay's strengths?
Justin: When it comes to credit selection, we have a deep bench of experienced professionals with rigorous mindsets who know these markets. Most importantly, we are decisive in pushing capital around: we will take concentrated risks in single names when we see asymmetric opportunities in our favour.
Andrzej: Also, while we rise or fall as investors on the strength of individual credit calls, we've spent time in recent years becoming smarter in translating macro views into segment and individual credit positioning. So in the same way that we engage with individual management teams, challenge business models, and work out the blind spots in particular credit stories - we're doing the same on the policy front. BlueBay's credit investors like myself and Justin go to policy meetings, for example, in normal times travelling three or four times a year to Washington DC to meet Federal Reserve and other officials who often say they're not accustomed to meeting credit investors, as opposed to economists or strategists.
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