Many investors have extensive allocations to government and corporate bonds. However as spreads have tightened and yields fallen, some have begun to look for yield in other parts of the fixed income market, such as Asset Backed Securities (ABS), where yields have been less suppressed by the ECB purchase program.
ABS bonds offer secured exposure to a diverse range of consumer credit, for example, mortgages, automobile loans, student loans and credit card receivables. But also some other collateral types, that are not easily investable otherwise. In this session Frank Meijer, Head of Alternative Fixed Income at Aegon Asset Management, will discuss the unique opportunities offered by ABS, including:
•Attractive yields - European ABS offers higher yield than most other global fixed income asset classes;
• Diversification of risk - ABS bonds have low correlations with most other major asset classes and offer exposure to consumer debt, compared to traditional government and corporate markets; and
• Short duration - ABS bonds are floating-rate bonds, and hence less sensitive to interest rate volatility.
At Aegon Asset Management we have a dedicated team of over 20 ABS professionals who manage approximately €15 billion globally, of which €5.2 billion is in European ABS (31 December 2019).