Baring Asset Management has been eschewing European corporate credits and buying bunds instead in reaction to the euro's continued strength in a low interest rate environment. Ed Britton, senior portfolio manager of sterling credit responsible for £700 million, says the strength of the euro is putting pressure on European industry so he does not want to invest in specific names. And, because the European Central Bank is keeping rates down, Baring has been buying bunds where its mandates allow.
Britton says he worried less about levels of German yields rising because, where the rest of the world is liable to see some economic recovery, Europe is lagging and yields will stay lower there longer. In addition, where client mandates permit, Britton has been taking positions in non-European issuers tapping the euro market to take advantage of low interest rates. He has also been moving to more defensive positions, for fear of a back-up in yields in the credit markets. "We have been moving into shorter-dated paper and out of the lower-rated, longer-dated names. We can afford to go down in credit quality and pick up some yield as long as you've done the work on the names," says Britton.
