Investment management firm Neuberger Berman is ramping up its focus on SMSF investors in the area of global fixed income capabilities.
“In our opinion, the global high-yield asset class presents an opportunity for diversification and income enhancement in SMSF portfolios,” Neuberger Berman senior portfolio manager Vivek Bommi told selfmanagedsuper.
“We have retail offerings in Australia distributed through intermediaries and we are actively looking into the SMSF channel given its growth potential – we see that SMSFs in Australia have a strong and growing need for less volatile, income-generative assets in their portfolios yet are underweight fixed income.
“From a diversification perspective, this is a missed opportunity because as an asset class, fixed income is defensive and can balance more volatile investments such as equities and can be a source of stable income for SMSF investors.”
Bommi noted fixed income, particularly global high-yield bonds, is an asset class that can provide diversification, security and income to an SMSF portfolio.
“Fixed income plays an important role in all SMSFs, none more so than those held for beneficiaries who are nearing or in retirement,” he said.
“It provides a less volatile and more consistent income stream as compared to equities, which is critical in the pension or drawdown stage.
“Given over 1.1 million Australians already have an SMSF and figures show this is expected to continue to grow over the next decade, we are recruiting professionals who are dedicated to the SMSF sector.
“SMSFs tend to be underweight in fixed income because as an asset class, Australian fixed income is relatively small, but with the growing availability and easier access to global fixed income products, we think now is the time to ‘go global’, much like how SMSF investors have been doing with equities.”
The large, liquid global high-yield bonds market was now worth $2.8 trillion, he noted.
In terms of regional composition, the United States makes up 60 per cent of the market, while Europe accounts for 20 per cent, with emerging markets making up the remainder, he said.
“The high-yield market today is a diversified market in terms of country and industry allocation, and includes household names like Netflix, Hertz, Fiat, Mattel,” he noted.
Neuberger Berman had $178 billion in fixed income assets under management for both institutional and retail clients globally, including Australia, as at the end of June 2018.
