Den Bosch-based Van Lanschot Asset Management, which manages E1 billion in European corporate bonds, has been buying subordinated bank debt, because it is offering good value relative to similarly rated corporate bonds. Peter Faessen, senior portfolio manager, says Van Lanschot is still positive on credit markets, because even though spreads are tight compared to what has been seen in the last three years, there have been tighter spreads in the past.
Most recently, the firm has bought a little tier one issuance from HBOS and Société Générale. Faessen sold some telecom names to fund the move. Telcos are trading at Bunds plus 80 basis points, whereas spreads on Barclays Bank or HSBC sub-debt is still at Bunds plus 100. Bank sub-debt is attractive because banks are well regulated and should continue to perform in an improving economy, he says. Faessen has also been buying upper tier one and tier two paper from insurance companies.
In terms of corporate bonds, Faessen has been buying names with rarity value to bring diversity to the portfolio. One bond he is looking at is Heineken's debut euro bond. Most recently he has bought bonds from TFR, a French television company, and AEM, a Northern Italian utility.
Van Lanschot uses various benchmark indices including Citigroup's euro big and the iboxx euro credit index.
