LONDON (18 May 2020) – Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions, has issued ‘Investment grade credit-based solutions - Capturing the opportunity’. This new paper explores the opportunities for pension schemes to incorporate global investment grade credit into their liability driven investment strategy to capture current high credit spreads, particularly the part of the spread relating to credit’s lower liquidity available in longer dated credit bonds.
Kenneth Ettles, investment principal at Aon, said:
“In the first few months of this year, investment grade corporate bonds succumbed to the economic and business pressures resulting from the COVID-19 virus and the dramatic slide in oil prices. However, analysing the situation more closely, we believe that most of the credit spread increases on bonds are due to their higher illiquidity rather than company default risk.
“While it is possible that there may be some corporate casualties from the economic downturn, our view is that investment grade credit yields are currently attractive. This is particularly the case for longer term investors, such as pension schemes, who can benefit from the illiquidity premium as they would be buying now with the aim to hold corporate bonds to maturity.”
The paper also examines the available options for pension schemes to incorporate this credit opportunity in their current investment strategy.
‘Investment grade credit-based solutions - Capturing the opportunity’ is available here.
Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.
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