Specialist in Asia Pacific, Japan, China, India and South East Asia and Global Emerging Market equities.
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Specialists in equity portfolios in Asia Pacific, emerging markets, global and sustainable investment strategies
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Our philosophy is very simple. We are constantly searching for high quality businesses and when we acquire them, we will work relentlessly with them to create long-term sustainable value through innovation, ESG-led and proactive asset management.
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This document is a financial promotion for The First Sentier Global Credit Strategy. This information is for professional clients only in the EEA and elsewhere where lawful. Investing involves certain risks including:
- The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back significantly less than the original amount invested.
- Currency risk: the Fund invests in assets which are denominated in other currencies; changes in exchange rates will affect the value of the Fund and could create losses. Currency control decisions made by governments could affect the value of the Fund's investments and could cause the Fund to defer or suspend redemptions of its shares.
- Credit risk: the issuers of bonds or similar investments that the Fund buys may get into financial difficulty and may not pay income or repay capital to the Fund when due.
- Interest rate risk: bond prices have an inverse relationship with interest rates such that when interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall.
- Charges to capital risk: The fees and expenses may be charged against the capital property. Deducting expenses from capital reduces the potential for capital growth.
- Derivative risk: derivatives are sensitive to changes in the value of the underlying asset(s) and/or the level of the rate(s) from which they derive their value. A small movement in the value of the assets or rates may result in gains or losses that are greater than the amount the Fund has invested in derivative transactions, which may have a significant impact on the value of the Fund.
- Sovereign debt risk: the Fund may invest substantially in government debt which is exposed to political, social and economic risks. In adverse situations, sovereign issuers may not be able or willing to repay the principal and/or interest when due and the Funds may suffer significant losses.
- Below investment grade risk: below investment grade debt securities are speculative and involve a greater risk of default and price changes than investment grade debt securities. In periods of general economic difficulty, the market prices of these types of securities may decline significantly.
For details of the firms issuing this information and any funds referred to, please see Terms and Conditions and Important Information.
For a full description of the terms of investment and the risks please see the Prospectus and Key Investor Information Document for each Fund.
If you are in any doubt as to the suitability of our funds for your investment needs, please seek investment advice.
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Strategy Overview
Key Facts
Strategy Overview
Key Facts
We go beyond the limits of most credit analysis
An allocation to global credit provides investors with higher yields than those on offer from cash and government bonds and diversification to complement equity exposures. Discover how we go the extra mile to navigate risks and opportunities in global markets.
Why invest with us in global credit?
We offer a range of actively managed strategies, as well as solutions for clients favouring a ‘buy and maintain’ approach. All utilise a proven investment process, incorporating disciplined in-house credit analysis and aiming to exploit relative value opportunities in global markets. We also have a proven ability to tailor bespoke, segregated mandates according to client requirements and have the local expertise to manage specialised regional portfolios.
A proven and differentiated investment philosophy: Since credit market returns are asymmetric, we focus on ‘avoiding the losers’ through rigorous credit analysis, combined with sophisticated portfolio construction focused on diversification.
Consistent long-term performance track record: Favourable risk-adjusted returns generated over 3-5 year time horizons.
Multi-dimensional credit research: Credit research focuses on assessing credit risk and identifying deteriorating issuers. Our analysis considers a variety of risk dimensions, enabling significant breadth.
Best-in-class Environmental, Social and Governance (ESG) integration: We have a vigorous Environmental, Social and Governance (ESG) process that is built in at both the company and product level. More importantly, ESG risk factors are an important consideration in the assignment of credit ratings on individual issuers.
Easyjet - our investment process in flight
Easyjet bonds had been held in our global credit funds for a few years. Earnings in the airline sector can be volatile due to fluctuating fuel prices and demand, but the bonds offered reasonable value for risk, in our view.
For illustration purposes only. Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of First Sentier Investors portfolios at a certain point in time, and the holdings may change over time.
Source: Bloomberg and First Sentier Investors as of 31 May 2020.
General Electric – losing power?
US-based conglomerate General Electric (GE) has been beset by questionable corporate governance practices, lack of transparency and a string of unexpected strategic announcements. The broader market appears to have extended GE some goodwill due to its ‘brand name’ rather than assessing the firm on underlying facts, though this appears to be changing gradually.
Our ESG risk rating on the company was initially raised in late 2017 and again in late 2018. Consequently, internal credit ratings have been consistently below the external ratings agencies. Our assessment on the credit and ESG risks, along with uncertainty on the company’s strategy and future credit profile prompted us to sell GE bonds in our global credit portfolios.
Risk assessment:
- GE reduced the size of its Board amid significant operating deterioration, underlining the governance risks present. There have been repeated changes in leadership, which disrupt the business and can result in continual shifts in company strategy. Repeated negative surprises and management changes are red flags in terms of internal controls and suggest a lack of cohesion in strategy. Accordingly it is difficult to envisage what the company might look like in the medium term.
- Our greatest concern is that cash flow will be insufficient to service the company’s enormous debt load. At this stage we are unconvinced that the firm’s current plan to retain the Power, Renewable Energy and Aviation subsidiaries – along with parts of GE Capital – will remain intact. This is a serious concern from a credit perspective as underlying businesses face serious headwinds and as management priorities are spread thinly. Further, GE Capital’s debt is now guaranteed by the parent. We think GE Capital could be breakeven at best and could require significant capital contributions in the near term.
For illustration purposes only. Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of First Sentier Investors portfolios at a certain point in time, and the holdings may change over time.
Nissan - falling behind the pack in the global car race?
Due to a number of environmental, social and governance concerns, our internal credit rating for Nissan has been below those of the major rating agencies for several years. The ratings agencies themselves have started to downgrade their ratings and outlooks for Nissan, moving more in line with our internal credit rating.
Risk assessment:
- Nissan’s oversight of employee safety and supply chain social responsibility is relatively weak, in our view. Operations in emerging regions mean social and work force relations issues are often present for carmakers and there is an ongoing focus on safety and supply chain management in the industry.
- In some cases there can be complex shareholder structures to contend with, resulting in additional governance risks. In Nissan’s case, a structure of cross shareholdings exists between Nissan, Renault and Mitsubishi. This undermines the governance profile of Nissan, highlighted by the scandal involving Carlos Ghosn. The former Chairman/CEO was arrested on various charges of financial misconduct, including misappropriation of Nissan funds.
- There are also question marks over Nissan’s internal quality control systems given frequent safety issues and recalls. Recently the industry regulator discovered that unauthorised inspectors had been approving vehicle quality, resulting in a recall of 1.2 million vehicles in Japan. There have also been allegations of anti-competitive behaviour and misleading claims – a red flag from a governance perspective.
- The global auto industry is evolving, partly reflecting environmental risks and trends. Increasing consumer awareness of pollution has resulted in rising demand for cleaner and more efficient vehicles, including fully electric models. Nissan has produced more electric vehicles than many peers, but volumes remain low relative to total production.
For illustration purposes only. Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of First Sentier Investors portfolios at a certain point in time, and the holdings may change over time.
Mike Arnold
Co-Head of Credit Research
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Tony Togher
Craig Morabito
Ben Samuel
Ky Van Tang
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