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Active or passive? Investing in European corporate bonds

11/07/2019

There are many approaches to managing European corporate bonds - we highlight some of the advantages and potential pitfalls of choosing between different approaches.

  • Euro denominated corporate bonds typically form a significant part of the asset mix for European pension funds and insurance company investors
  • A highly diversified passive portfolio can be attractive for its ability to offer a potential credit market yield premium, whereas active management is typically attractive only if it can consistently deliver an excess return that justifies higher fees
  • We believe active management focused on selecting holdings that overcompensate for risk and avoiding credits that undercompensate has the potential to deliver attractive outcomes – and the European market regularly supplies mispricing opportunities

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