Asset-backed securities backed by loans and other credits, from car loans to lending to corporations, face the same challenges as other fixed income segments. These include central bank policy tightening, volatility in inflation expectations and growth worries.
However, in its favour, high-quality ABS derives a certain resilience from the typically short duration of the underlying assets as well as having a cushion against economic shocks, for example, in the form of generally solid interest coverage or locked-in low financing costs.
Listen to this Talking heads podcast with senior portfolio managers David Favier and Olivier Boutoille and Daniel Morris, chief market strategist. They firstly discuss the current market environment before focusing on the advantages of investing in these floating rate instruments that offer varied risk/returns profiles for investors.
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