PSigma Investment Management has reduced its exposure to equities and boosted its allocation to corporate bonds.
Thomas Becket, chief investment officer of PSigma, says the asset manager refocused its investment strategy after the recent market rally and took the central view that corporate credit will be able to generate long-term average equity returns with “far lower” volatility.
PSigma has reduced its exposure to ‘quality’ equities after becoming concerned about the valuations of well-known defensive stocks. The allocations to cyclical and recovery equities have been maintained as value is still seen in these spaces.
“The best risk/reward opportunities that we can still find in financial markets remain in corporate credit markets, where yields are attractive and there remains the potential for capital gains. We therefore recently increased our exposure to such assets,” Becket explains.
“Admittedly, we are arguably taking a higher risk of default than by investing in government bonds,” he adds. “But we feel that we are adequately compensated for taking this risk through the very attractive relative yields on offer.”