After a difficult year for financial markets, Mark Stanley, portfolio director at Payden & Rygel, a US-based privately-owned investment advisor, which manages fixed income and equity portfolios, discusses with WealthBriefing the benefits of investing in fixed income.

As bonds are seen to be making a come-back, Mark Stanley at Payden & Rygel, the US-headquartered wealth manager, has set out the case for holding fixed income.

“As fixed income managers, we build very diversified portfolios which aim to outperform the indices,” he told WealthBriefing in an exclusive interview. “We’re often seen as a good partner for someone looking for fixed income and considering how to shape a portfolio.”

“The trend over the last 10 years has been to access private markets. But it has become clearer that liquidity does actually matter and is very important,” Stanley said. “Today, you don’t have to compromise liquidity to get attractive yields; and if you look across the fixed income spectrum, you don’t have to take a lot of risk either. It’s a really good time for long-term investors that want real returns.” 

“As you move up the risk scale, you can get yields of 6 to 7 per cent, for instance, which can rise toward 10 per cent if you look at emerging market debt. This compares to equity funds with yields of around 2 to 3 per cent,” he added.

“Sure, there will be volatility in those asset classes but you’ve got such a good yield, it’s highly likely that you will get positive returns,” Stanley said. “It’s a great time to be allocating to fixed income assets. We have a whole range of funds, ranging from a liquidity fund for long-term cash that generates higher returns than a bank account.” 

“We run a sterling reserve fund, for instance, which is a short duration bond fund which has an AAA rating from Fitch, giving a yield of 4 per cent which is great for a wealth manager who is looking for low risk.”

“We also run a pure beta exposure to the global fixed income universe via a tracker. Now is a very good time to be in fixed income. High Yield and EMD look especially attractive for long-term investors,” he said.

ESG focus
“Our funds are all Irish domiciled funds, so the EU’s Sustainable Financial Disclosure Regulation has been a big feature for us over the past 12 months,” Stanley continued.

He sees the regulation as a good way to fight against so-called greenwashing and ensure that funds do meet the environmental, social and governance criteria that they claim to meet.

“We went with Article 8 under the SFDR right from the beginning,” he said. “All but two of our funds do come under Article 8 which promotes sustainability, and we are also looking at Article 9, which is more impact orientated, for some of the funds.” 

ESG criteria are incorporated into all the firm’s strategies. "We’re a net-zero asset manager and have been since June last year. We’ve laid out our net-zero plans and have been a carbon neutral company for some time.” 

“The aim of our emerging markets fund, for instance, is to outperform emerging market indices whilst incorporating ESG factors,” he added.

“We do invest a lot in solar, and also in wind, but the social and governance factors are also very important to us, not just the climate” Stanley said.

“We’ve done our best to promote the asset management industry for women and minority groups,” he added.

“We work a lot with pension funds, wealth managers, and in particular with the Nordics and Dutch pension funds who are ahead in terms of ESG. Dutch pensions funds signed a mandate to reduce emissions,” Stanley said.

Los Angeles-based Payden & Rygel has $135 billion assets under management