Markets have focused on whether European Central Bank policy measures in recent years have benefited the region’s corporate sector.
Coupled with the increasingly short-term view of bond holders, are investors who are looking to hold short-term credit in the European market being adequately compensated for their exposure?
Looking at the performance of the 33 investors dedicated to euro-denominated short-term corporate debt, returns are positive without ever shooting the lights out over the past half-decade.
The best performer returned 28% in euro terms over the five year period to the end of November 2016, while the average of the 14 managers with a track record covering this period returned 15.7%.
However, there are a handful of investors in this specialist area who have remained ahead of the chasing pack regardless of what difficulties corporates have faced over this timeframe.
The Oddo Compass duo of Henning Lenz and Alexis Renault, who also encountered their asset management company Meriten being taken over by French group Oddo during this period, have shown solid outperformance.
The Citywire A-rated pair returned 20.8% in absolute terms on the Oddo Compass Euro Credit Short Duration fund, while managing to outperform their peers regularly, albeit by the narrowest of margins at times. For example, during the period November 2013-November 2014, the duo returned 2.2% against an average manager return of 2.13%.
Lenz and Renault, who have co-run the fund since its 2011 launch, show a strong preference for industrial bonds, which make up 20% of exposure. This is while the largest country bets are currently Italy (16.1%), Germany (15.2%) and France (15%).
Keeping with cash
Bettering the Oddo Compass pair in absolute terms is Anaxis bond manager Pierre Giai-Levra, who runs the Anaxis Bond Opportunity Short Duration fund. Giai-Levra, who is CIO at the asset manager, has run the fund since 2010 and was joined by co-manager Thiabault Destrés in 2015.
A-rated Giai-Levra has survived with an even tighter margin of outperformance than Lenz and Renault. He returned narrowly more than the 2.13% average manager return in 2013-14, but dwarfed his peer in 2011/12 when he returned 12.9% against his counterparts’ 8.2% return.
According to the most recent factsheet, Giai-Levra has a significant allocation to cash, which accounted for almost one-quarter of exposure at the end of November 2016. This was ahead of his telecoms and food & beverage investments. France and Germany are his preferred country bets.