Cash is king in the current credit environment, according to Victor Consoli, senior managing director and high-yield researcher at Bear Stearns. "If you can hold cash, hold cash," he said. Consoli recommends investors hold 20-25% of their portfolios in cash until spreads widen an additional 50-75 basis points.
From a corporate credit strategy overview, Consoli believes opportunities are limited and recommends investors hold a market weight allocation to high grade and underweight high yield and emerging markets. That being said, he suggest investors with more flexible mandates consider adding emerging market exposure to pick up some yield without taking beyond investment-grade risk. "I'm surprised by how many traditional investors are looking into [EM credits]," he said, quipping, "Russia '30s trade at 200bps over. Who knew? And they lend to people now. It's incredible."
