The advantages of global credit over global corporates | Insight Investment

Four reasons to expand your credit universe:

• Extra diversification – Global credit¹ is a larger universe and offers a wider opportunity set than global corporates. It broadens its scope to capture non-corporate issuers that provide additional diversification benefits.
• Stronger credit profile – The non-corporate universe is of a notably higher credit quality on average, making the global credit universe more defensive (overall average credit rating of A2, or A), than the global corporate universe, (A3, or A-).
• Attractive yield spread and comparable absolute yield – Absolute yield levels at 5.25% for global corporates and 5.12% for global credit, are high relative to their respective histories. The additional yield, or spread, over government bonds available on global corporates is low compared to the spread available on global credit universe, making global credit appear more attractive.
• Higher risk adjusted returns from global credit – With comparable returns but less volatility over the long-term, global credit may offer a more attractive returns profile. Since September 2000, corporate and credit returns have been similar; global corporates have generated 4.2% annualised and global credit returning 4.1% annualised. However, the volatility of global credit returns over that period has been notably lower, with an annualised standard deviation of 6.6%, compared to 6.9% for global corporates. Global credit has been more defensive, outperforming in four of six years when corporates had negative returns.