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BAML recognises unstoppable globalisation of credit markets in landmark decision

Home / Spectrum / BAML recognises unstoppable globalisation of credit markets in landmark decision

Fraser Lundie, CFA, Co-Head of Credit and Senior Credit Portfolio Manager
29 July 2015
Credit

Hermes Credit has welcomed today’s decision from Bank of America Merrill Lynch to retain emerging market issuers in BAML’s benchmark Global High Yield Index.

Fraser Lundie and Mitch Reznick, the co-heads of Hermes Credit, believe emerging markets play a fundamental role in global high yield investing and keeping this area of the asset class in the benchmark is beneficial for both investors, as well as the corporate issuers.

Hermes Credit has long advocated the benefits of a truly global high yield bond market and has seen significant investor demand for this evolving marketplace in recent years.

Following today’s annual BAML review, the benchmark Global High Yield Index and its sub-indices will continue to include emerging markets issuers. Lundie believes BAML’s decision is a strong step forward in embracing a truly global investment market.

“As globalisation continues, it has become more and more difficult to draw any line between nations,” Lundie explains.

“Companies are becoming increasingly global. The location of a corporate headquarters means less and less in today's world. By embracing corporates from across the globe, investors can access risk from a diverse array of locations and credit qualities – allowing for higher risk-adjusted returns.”

Reznick also believes today’s decision is positive for the ongoing drive for higher ESG standards across the world.

“The presence of emerging market companies in the global bond markets fosters the development of more open and transparent reporting and dialogue with investors from these jurisdictions,” Reznick adds.

“We believe the presence of a truly global index can lower the cost of capital for issuers of hard currency debt from emerging markets, as it supports an active marketplace into which the companies can issue bonds. Both of these reduce cost of capital and volatility.”

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Fraser Lundie CFA, Co-Head of Credit and Senior Credit Portfolio Manager Fraser joined Hermes in February 2010 and is lead manager on the Hermes range of Credit strategies and co-head of credit. Prior to this he was at Fortis Investments, where he responsible for Euro High Yield.  Fraser graduated from the University of Aberdeen with an MA (Hons) in Economics and earned an MSc in Investment Analysis from the University of Stirling. He is a CFA® charterholder and member of the Association for Investment Management and Research (AIMR), having gained the UKSIP Level 3 Certificate in Investment Management (IMC). In 2013, Fraser featured  in Financial News’s ‘40 Under 40 Rising Stars of Asset Management’, an editorial selection pick of the brightest up-and-coming men and women in the industry, and in January 2015, Fraser was named as one of the top 10 star fund managers of tomorrow by The Daily Telegraph. CFA® is a trademark owned by the CFA Institute.
Read all articles by Fraser Lundie

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