AXA Investment Management, which has £20 billion in fixed-income assets under management in its London office, is looking to buy credits that are fundamentally sound but have dropped in price on the back of market volatility. Denis Gould, head of the sterling investment-grade team, says, "at any hint of bad news, prices are dropping sharply. As investors, we have to make sure we can take advantage to be put in a position to buy."
Once a name starts widening on bad news, Gould and AXA's analysts take a look at the credit to see if it is worth buying. They ask two simple questions: is the credit going bust? will it stay investment-grade? If the answers are no and yes, respectively, then they place a buy order.
AXA recently bought the triple-B 1.18% of '09 from Bombardier the Canadian jet maker. The issue had been at 57 in October and has since risen to the 80s--a 39% return. Gould says there are bargain-hunting opportunities on volatility, because investors are nervous about being stuck with the next Enron. Good credits are being hurt by investors' risk aversion, but excellent credit research is key.
The strategy this year has been to avoid the blow-ups, says Gould. Avoiding the 13 sterling issuers out of 250 that blew up earned portfolio managers an extra 71 basis points in return. AXA uses a variety of benchmark indices.
