“We see a lot of interest in global high yield bonds from retail and wholesale investors in Singapore and Hong Kong,” said Hawa, who is based in Rotterdam.
Robeco sees a “tremendous” opportunity in the high yield bond market due to several factors, Hawa said.
Fundamentally, global interest rates will likely remain low and investors will search for alternatives that provide better yield. In addition, a correction following a sell off in July and August has brought down valuations, and risk is not expected to increase.
“Exposure to good quality companies with strong balance-sheets will mean the default rates are also going to remain low going forward.”
Even as improvements in some key indicators like the US real estate and consumer markets support a rise in interest rates, Hawa believes the US Federal Reserve will raise rates slowly.
“The language coming out from [US Federal Reserve Chairman] Janet Yellen is quite dovish. That means, the willingness of the US Fed to increase rates is not quite there yet. If they do increase rates, in our view it would be very slow process.”
The gradual rate hike in the US, along with the European central bank’s recent rate cut and Japan’s monetary stimulus programs are likely to result in a low interest rate scenario globally.
“This means, as an investor, the search for yield is very much on. As an investor in fixed income bonds, if I have to buy a government bond, my yield is extremely low. I need to have a flexible approach and I need to increase my risk profile by [getting exposure to] corporate and credit risk. That is the reason why high yield has been quite popular. And, our view is it will remain popular.”
Hawa represents Robeco’s fixed income investment team, which is comprised of eight portfolio managers and 13 credit analysts, most of them based in Rotterdam.