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  • October 25, 2018
    Fixed Income
    Latin America at the ballot box: a buying opportunity for credit investors?
    Andrey Kuznetsov, CFA
    Latin American countries have been convulsed by political and economic tumult in recent months. On Sunday, Brazilian voters will go to the polls in the second-round runoff of a presidential election that has been dominated by three issues: economic weakness, corruption scandals and rising levels of violence.
  • October 9, 2018
    Fixed Income
    Amplified: Credit Spectrum Q3 2018
    Eoin Murray
    In this podcast, Eoin Murray, Head of Investment, and Andrey Kuznetsov, Portfolio Manager in the Hermes Credit team, discuss the impressive growth of credit markets beyond the US and the compelling opportunities this presents for investors seeking greater diversification.
  • September 18, 2018
    Fixed Income
    Beyond borders: breaking down silos in credit
    Andrey Kuznetsov, CFA
    In this issue of Spectrum we discuss the impressive growth of credit markets beyond the US and the compelling opportunities this presents for investors seeking greater diversification. We also explore the potential for generating alpha through active engagement on environmental, social and governance (ESG) issues. The great European bond boom The eurozone crisis and Brexit have dominated headlines in recent years, but – behind the scenes – something of a mini-economic miracle has been taking place in the European credit markets: the rise of the European corporate bond. Before the launch of the euro in 1999, Europe’s corporate lending market was dominated by local banks operating at individual country level. However, in recent years, the powerful combination of the single currency’s growth, regulatory change and the development of a liquid corporate bond market has led to a boom in companies using the bond markets as a means of raising debt; the number of issuers coming to the high yield market has more than doubled in the last decade, from 139 in August 2008 to 283 as of August 2018. Source: ICE Data Indices LLC, Hermes Credit as at August 2018.
  • August 28, 2018
    Fixed Income
    Trouble in Turkey: what does it mean for credit markets?
    Andrey Kuznetsov, CFA
    A currency crisis and a feud with the US has placed more pressure on the beleaguered Turkish economy in recent weeks. Andrey Kuznetsov, Portfolio Manager at Hermes Investment Management, assesses the country’s economic woes – and pockets of corporate strength and the opportunities they offer. The Turkish lira has lost more than a third of its value against the dollar so far this year as a rift with the US – over the continued detention of an American pastor in Turkey – added to concerns about President Recep Tayyip Erdogan’s influence over monetary policy. But cracks in the country’s economic foundation were already spreading before the spat with the US – and the Trump administration’s subsequent imposition of higher tariffs on imports of steel and aluminium from Turkey – accelerated the lira’s slide.
  • June 21, 2018
    Fixed Income
    Turkey’s election: a case for cautious optimism?
    Andrey Kuznetsov, CFA
    Turkish parliamentary and presidential elections will take place this Sunday amid a febrile political and economic climate. In recent months, the country has been grappling with double-digit inflation, a pressured lira and fears over the independence of its central bank. As voters prepare to go to the polls, we assess the investment landscape in Turkey. Turkey is no stranger to political instability. On Sunday, Turks will go to the polls for the sixth time in four years, and for the second time under emergency law after President Recep Tayyip Erdogan brought forward the election by 18 months. The move, Erdogan said, reflects the country’s need to “overcome uncertainty”, but critics argue he wants to push through the vote before the country’s economic woes get materially worse. In Turkey, polls are quite unreliable, but for now it looks like Erdogan will win the presidential race. However, it is likely that his victory will only be sealed in the second round run-off, which will take place on 8 July, should no candidate receive an outright majority this weekend. The parliamentary election, however, looks too close to call. There is a risk that Erdogan’s ruling AK Party and the nationalist MHP party will not retain a parliamentary majority after Sunday’s vote. But success for the opposition will probably make it more difficult to pass much-needed fiscal and structural reforms. Such an outcome would cause more uncertainty for the country and investors, and increase the likelihood of further elections.
  • April 24, 2018
    Fixed Income
    Hybrids revisited – opportunities across the Atlantic
    Andrey Kuznetsov, CFA
    Almost two years ago, Andrey Kuznetsov, Credit Portfolio Manager and Audra Stundziaite, Senior Credit Analyst, at Hermes Investment Management, argued that the market for European hybrids was attractive for both issuers and investors. Today, they revisit the case for hybrids and ask: in the growing global hybrid market, where is the relative value? In 2016, we argued in favour of an increased allocation to the European hybrid market in an issue of our quarterly commentary Spectrum, “Putting two and two together: how hybrids can add up for investors.” The central premise was that hybrids were attractive for investors due to the inherent investment benefits they offer and a supportive economic backdrop
  • April 17, 2018
    Fixed Income
    Hybrids revisited: opportunities across the Atlantic
    Andrey Kuznetsov, CFA
    Almost two years ago, we argued that the market for European hybrids – instruments that blend features of debt and equity – was attractive for both issuers and investors. Today, we revisit the case for hybrids and ask: in the growing global hybrid market, where is the relative value?Hybrids have developed a track record with both issuers and investors in recent years: investors are attracted by the yield pick-up they offer, while they are a relatively cost-effective funding instrument for issuers.
  • December 4, 2017
    Fixed Income
    Republican radicalism: The implications of US tax reform for credit investors
    Andrey Kuznetsov, CFA
    A major question facing credit investors over the next year is the fate of US tax reform. The House of Representatives and Senate have both released their sweeping tax reform packages in recent weeks. But uncertainties remain as both chambers must reconcile their differences. As the year-end deadline to reform the US tax system approaches, we assess how proposed changes in interest tax deductibility could have far-reaching implications for credit markets. Congressional Republicans have taken important steps in recent weeks toward the biggest overhaul of the US tax system since the 1980s. The House of Representatives passed its tax bill earlier this month. And last week, the Senate voted 51-49 to pass its version of the tax reform bill. But there are sharp differences between the two proposed bills and reconciling them will be challenging for both chambers. As such, it remains uncertain whether they can meet President Trump’s year-end deadline. One particular proposal that could significantly impact credit investors has come from the House of Representatives. It wants to cap the tax deductibility of interest payments exceeding 30% of a company’s earnings before interest, tax, depreciation and amortisation (EBITDA). In contrast, the Senate proposes limiting it to 30% of pre-tax net income.