Standard Life Investments plans to extend the risk profile of its E16 billion corporate bond portfolio. Andrew Sutherland, investment director for credit at the Edinburgh-based manager, says he will wait for signs that general market volatility has abated and stabilized before making any move. He will reinvest in triple-B rated corporate credits once a number of factors become apparent.
Specifically, Sutherland is waiting to see what happens once the U.S. begins its war in Iraq. He wants to gauge how U.S. consumer confidence is affected. Sutherland is also holding off getting back into lower-rated names until equity markets show signs of maintaining stability and corporate default rates appear to reach bottom. Once these factors begin to materialize, Sutherland will add triple-B rated names across the board. He says basic industries and consumer names will be a specific focus. Going forward, however, Sutherland anticipates some triple-B names will have question marks concerning accounting problems and says careful selection will be key.
Over the past few months, Sutherland has increased triple-A exposure and remains cautious and conservative for the time being. He sold triple-B positions and reinvested in supranationals such as the European Investment Bank and the World Bank as well as other government agencies. The firm uses a variety of fixed-income benchmarks.
