This Is The Year Of The Bond – Natixis
Natixis Investment Managers held a Thought Leadership Summit in Paris this week, with participation of its affiliates, discussing the global macro-outlook, a range of asset classes, and investment opportunities in 2023.
After a tough year in 2022, Gad Amar, head of Western Europe at Natixis Investment Managers, believes that 2023 marks the return of fixed income as an asset class, with private assets continuing to play a role.
Amidst volatile and uncertain markets, Amar said in Paris that there has been a lot of demand for fixed income as an asset class from clients recently, particularly investment grade credit, as it offers good returns. “Private assets are also here to stay as some investors fear that they are missing out on higher returns, and want to invest in riskier assets in the longer term,” he continued.
“We are also seeing a drive towards ESG-focused funds and investments, as investors increasingly want to help tackle issues like climate change. Many of our funds come under Article 8 and 9 of the EU’s Sustainable Finance Disclosure Regulation,” he added.
Speaking at the event this week, Elaine Stokes, EVP, portfolio manager and co-head of full discretion team, at Loomis Sayles, also favoured fixed income, saying “it’s an exciting time to be in bonds in 2023.”
This was echoed in Paris by Phillippe Berthelot, CIO credit and money markets at Ostrum, who said “2023 is the year of the bond.”
“It will be a good year for fixed income, but bumpier than expected,” he continued. “We will continue to have volatility and that’s where investment opportunities can be found. That’s what this year will be about,” Stokes added.
Stefan Isaacs, deputy CIO, public fixed income at M&G Investments, and Sonja Laud, CIO at Legal & General Investment Management, also said at an event last week that they favoured fixed income, especially investment grade credit, as yields are much higher than last year. “Bonds are back as an effective diversifier,” Laud added. Bonds' comeback this year was also highlighted by Franklin Templeton this month. See here.
However, in Paris this week, Francois Collet, deputy CIO, DNCA, was at odds with this, saying that he does not favour fixed income and does not believe that 2023 will be the year of the bond.
Looking at whether investors should be patient for equities in 2023, Soliane Varlet (pictured), SRI equity portfolio manager at Mirova, an impact investor, said in Paris that she is optimistic for this asset class in 2023. “It was a tough year for equities in 2022, faced with high inflation rates, geopolitics and China’s lockdown," she added. But she is more optimistic for European equities in 2023. Isaacs also sees pockets of opportunity for equities in 2023, notably in Japan.
“It’s important to pick the right firms and themes," Varlet continued. "We focus on ESG-focused and sustainable investments. There are opportunities for high quality firms that fight climate change and offer energy dependence, for instance. The war between Russia and Ukraine shed light on Europe’s reliance on Russia’s gas supplies. Renewable energy offers a good way to reduce this dependence," she said. “The changing equity landscape provides a good way for firms to re-position themselves and follow the long-term trends. Investors increasingly want to have an impact to help transform society, she added.
Mirova has a range of ESG-focused funds covered by Article 9, including a focus on ecosystem conservation, biodiversity and sustainable agriculture, with investments ranging from precision agriculture, regenerative agriculture and technologies to reduce emissions from the sector.