Duration, Corporate Bonds, and High Yield: The View of Active Fixed Income Managers

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Corporate bonds and high-yield strategies
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According to Alessandro Tentori, CIO for Europe at AXA Investment Managers, two factors will drive fixed income performance this year: “On one hand, a relatively contained duration management approach, with a defensive stance on U.S. bonds and a hint of optimism on European bonds; and on the other hand, a strategy inclined toward taking credit risks, including high yield, especially in the U.S. market, supported by both macroeconomic analysis and corporate balance sheets.”

At Neuberger Berman, they believe that after several years in which fixed income markets were primarily driven by central bank policies, this year attention will likely shift more toward fiscal actions: the policy and revenue decisions of the new Trump administration, as well as those of other governments that are redirecting their priorities or facing financial pressures.

“Since the arrival of COVID-19, investors have largely focused on central banks for clues about fixed income performance—from the implementation of zero-rate policies and financial liquidity provisions to sustain the global economy during the pandemic, to the adjustments made to counter rising inflation in 2021 and 2022, and the widely anticipated start of the current monetary easing cycle. With inflation continuing to decline, we are entering a period of gradual central bank rate cuts,” explains Neuberger Berman’s market outlook report.

Key Investment Ideas

Experts at Wellington Management see this as a moment to take advantage of bond market divergence. They acknowledge that caution will set the tone for 2025, a year in which sovereign bond yields could help investors offset potential interest rate volatility. “High levels of nominal growth worldwide provide a starting point that should cushion the impact of a potential global economic slowdown. At this moment, we do not foresee a recession or, consequently, an increase in rating downgrades and defaults. We also believe that high-yield securities currently offer adequate compensation for investors amid rising volatility. However, the exception to this rule is the long end of the yield curve, where longer-maturity bonds are struggling due to supply dynamics, inflation expectations, and higher nominal growth,” they explain.

Tentori also notes that in 2025, investors should not only consider the effects of duration, credit, and currency risk but also the trajectory of monetary policy. “This has been a key factor in fixed income portfolio construction, particularly during the period of Quantitative Easing. It could once again prove crucial to performance in the near future, especially amid policy divergence between the ECB and the Federal Reserve,” he says.

Aegon AM focuses on asset-backed securities (ABS), arguing that in an environment driven by sentiment and fundamentals, ABS should be favored. “Falling interest rates are positive from a fundamental perspective, though they may reduce the coupon of floating-rate products like ABS. However, growth and inflation expectations have undergone significant shifts over the past two years, as have interest rate outlooks in many markets. ABS investors are less affected by changes in interest rate expectations since the carry of these instruments depends primarily on the short end of the yield curve. As curves remain inverted, the current yield is about 80–90 basis points higher than the yield to maturity,” they argue.

A segment that Felipe Villarroel, partner and portfolio manager at Vontobel, finds particularly attractive for portfolios this year is corporate credit. “One of the main reasons we believe credit will continue to outperform sovereign debt in the medium term is corporate fundamentals. Everyone knows that corporate bond spreads are tight, and we expect some volatility over the next 12 months. However, if the macroeconomic outlook remains reasonable (i.e., no recession) and corporate finances stay strong, we see no clear reason to expect a significant increase in defaults,” Villarroel argues.

The Strength of High Yield

After high-yield bonds outperformed investment-grade bonds in 2024, managers seem to continue favoring them. According to Bloomberg data, higher-yielding assets—such as high-yield bonds, leveraged loans, and emerging market hard currency debt—outperformed investment-grade bonds for the fourth consecutive year. Specifically, U.S. cash high-yield bonds posted an 8.19% return, compared to 1.25% for investment-grade bonds.

In this regard, analysts at Loomis Sayles, an affiliate of Natixis IM, note that the fundamental outlook remains solid, supported by a positive earnings environment and a resilient U.S. economy. “Currently, the high-yield risk premium is at the narrowest end of its historical range, even considering the generally positive economic backdrop. The good news is that we anticipate relatively moderate credit losses this year, with defaults likely to stay around 3%. Overall, we believe high-yield bonds will remain an attractive place for carry, though investors should temper their total return expectations,” they argue.

Mexico Would Face a Sharp Slowdown if the U.S. Imposes Tariffs

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Amid the likely implementation of tariffs by the United States and Mexico’s strong economic dependence on the world’s largest economy, Mexico will be the most affected economy in Latin America. The impact would be so significant that its GDP could grow only 0.6% in 2025, according to Moody’s Analytics, through its Director of Economic Analysis for Latin America, Alfredo Coutinho.

Moody’s Analytics indicates that the impact on the Mexican economy would mainly result from a slowdown in the volume of exports and imports in the coming months. This would be a natural consequence of a deterioration in Mexico’s trade relationship with its main commercial partner due to a protectionist economic policy like the one U.S. President Donald Trump plans to implement.

“As a result, we estimate that the Mexican economy would lose around one percentage point of growth in 2025. Therefore, we expect the country to grow only 0.6% this year. Without a doubt, it will be the most impacted country in Latin America,” said Coutinho.

Impact of Tariffs: A Multiplier Effect

The imposition of tariffs by Trump, scheduled for February 1, unless negotiations between the two nations prevent them, would have a multiplier effect on the Mexican economy, making their consequences even more significant.

“In addition to affecting foreign trade, tariffs could lead to higher inflation and currency depreciation, which in turn would force the central bank to tighten its monetary policy to counteract these effects,” said Coutinho.

Moreover, an additional economic impact of the tariff imposition would be on investment flows and the arrival of foreign companies to Mexico, a phenomenon known as nearshoring, due to rising production costs.

“The tariff and protectionist policy of the U.S. government will have an effect on investment flows resulting from the relocation of companies, not only from the United States but also from other parts of the world, particularly Asian companies looking to enter the Mexican market,” he explained.

Additionally, new investments were already under threat due to recent constitutional reforms in Mexico, particularly the Judicial Power reform and the elimination of autonomous agencies, which weaken the checks and balances in the country’s governance.

Latin America Will Hold Strong

Despite the risks and uncertainties posed by the new U.S. policies, Alfredo Coutinho acknowledged that the Latin American economy is in a good position to face 2025.

Coutinho highlighted that countries such as Peru, Brazil, Uruguay, Chile, Colombia, and Mexico led the advancement of the Latin American economy during 2024. “Mexico’s case was significant because it went through another year of slowdown, but this was not surprising due to the change in government,” he noted.

Moody’s Analytics forecasts that Latin America will grow 2.1% in 2025, with Argentina leading the region with an expected GDP growth of 3.9%—a very positive outlook considering the country’s long history of economic slowdowns and recessions over the past decades.

2024 Was a Year of Moderate Declines in Home Sales in Florida

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At the end of 2024, the Florida real estate market recorded a 1.9% decline in sales compared to 2023, according to Florida Realtors.

However, the real estate market continued to show an increase in new listings for both single-family homes and condos/townhouses, a rise in inventory levels for both property categories, and a stabilization of median prices for existing single-family homes, as well as condo and townhouse units, according to the latest housing data released by Florida Realtors®.

Closed sales of existing single-family homes across the state at the end of the year totaled 252,688, a 1.9% decrease compared to the end of 2023, according to data from the Florida Realtors research department, in collaboration with local real estate boards and associations.

Regarding existing townhouses, a total of 94,380 units were sold statewide in 2024, representing a 10.5% drop from 2023. Closed sales can occur 30 to 90 days or more after sales contracts are signed.

Modest Declines and Price Stability

“In general, Florida’s housing market in 2024 saw mostly modest declines in sales and little change in home prices,” said Brad O’Connor, Chief Economist at Florida Realtors.

Despite some fluctuations in mortgage rates, they remained high relative to recent years, added O’Connor.

Additionally, he noted that the most significant changes in 2024 were the widening performance gap between the single-family home market and the condo/townhouse market, as well as the overall increase in inventory levels.

December Sales Helped Year-End Transactions

O’Connor pointed out that December’s closed sales for single-family homes helped boost year-end transactions.

“This strong performance brought us to nearly 253,000 closed single-family home sales statewide for the year, which is just under 2% below the 2023 total of nearly 258,000 sales but also marks the lowest annual sales we have seen since 2014,” he said. “There was little variation across the state in 2024, as most counties saw only small year-over-year decreases,” he explained.

The statewide median sale price for existing single-family homes at year-end was $420,000, a 2.4% increase from the previous year. Meanwhile, the statewide median price for condos and townhouses was $320,000, reflecting a slight decline of 0.8% compared to the prior year. The median price represents the midpoint—half of the homes sold for more, and half sold for less.

December 2024 Market Trends

Although year-end sales were lower than in 2023, December showed stronger performance for single-family homes, with closed sales increasing 12.8% compared to December 2023. In contrast, condo and townhouse sales declined by only 0.5% year-over-year, according to Florida Realtors data.

The statewide median sale price for existing single-family homes in December was $415,000, reflecting a 1.2% increase from the previous year. Meanwhile, the statewide median price for condos and townhouses was $315,000, a 4.5% drop from the previous year’s figure.

2024 Chicago Marathon Breaks Fundraising Record with $36 Million Raised

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The 2024 Bank of America Chicago Marathon raised a record $36 million for local, national and global nonprofits, bringing the total raised since 2002 to over $358 million. The event’s Charity Program allows runners to raise funds for affiliated causes while participating in the marathon. 

“We’re excited to continue to grow this tradition and support the incredible work being done by so many organizations,” said Carey Pinkowski, Executive Race Director. 

Among the standout fundraisers was Calr Allegretti, President of Arbos Investments, who shattered the fundraising record by raising $277,491 – more than $100,000 above the previous record. His funds supported Greater Chicago Food Depository, PAWS Chicago and Lurie Children’s Hospital. 

Allegretti, a long-time marathoner, has used the race to raise funds for cancer research and Lurie’s since 2007 when his son was treated for cancer at the hospital. He completed his 70th marathon in 2024, marking the end of his marathon career with his monumental achievement. 

Runners still have the chance to join the 2024 event by fundraising for official charity teams. Participants are required to raise a minimum of $2,100. For details visit the following link.

Invesco Launches an Equal Weight U.S. Equity ETF with a Synthetic Structure

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Invesco and synthetic ETFs
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Invesco expands its product range with the launch of the Invesco S&P 500 Equal Weight Swap UCITS ETF, a fund designed to replicate the performance of the S&P 500 Equal Weight Index using a synthetic structure. According to the asset manager, the benchmark index is built from the S&P 500 Index, assigning the same weight to each company in the index instead of the standard method of weighting companies by market capitalization.

“This is the world’s first Equal Weight ETF with synthetic replication. For investors seeking exposure to the S&P 500 Equal Weight Index, Invesco now offers both physical and swap-based ETFs, allowing investors to choose their preferred replication method,” the firm stated.

According to Invesco, demand for Equal Weight strategies has continued to rise since Mega Cap stock prices hit multi-decade highs and began to appear overvalued. This trend has been particularly noticeable in U.S. equities, where S&P 500 Equal Weight ETFs have attracted more than $10 billion in net inflows since July 2024. The top 10 stocks in the S&P 500 Index still represent 37% of market capitalization, keeping concentration at historically high levels.

Unlike existing products in the market, the Invesco S&P 500 Equal Weight Swap UCITS ETF aims to replicate the performance of the S&P 500 Equal Weight Index through swap-based replication. The ETF will hold a basket of high-quality stocks and achieve index returns through swap agreements with major financial institutions. These swap counterparties will pay the ETF the index return, minus an agreed fee, in exchange for the returns of the ETF’s held stock basket.

Following this launch, Laure Peyranne, Head of ETFs Iberia, LatAm & US Offshore at Invesco, stated: “We are excited to start the new year with an ETF that combines two areas of Invesco’s expertise. We are a global leader in equal-weighted equity exposures, a rapidly expanding area whose demand surged significantly in 2024 and which we now offer through our solid and highly efficient swap-based structure, developed over 15 years ago. We have the world’s largest synthetic ETF, and now investors can benefit from the same advantages for their exposure to the S&P 500 Equal Weight.”

Peyranne also noted that when a Europe-domiciled ETF uses synthetic replication on certain core U.S. indices, it is not required to pay taxes on dividends received.

“This allows us to negotiate better terms with our swap counterparties, including receiving the gross return of the index, which is an advantage over a physically replicated ETF that typically pays a 15% to 30% tax on dividends. In the case of the S&P 500 Equal Weight, given current dividend levels, this translates to an approximate 20 basis point improvement,” she explained.

Invesco has committed to the swap-based replication model, maintaining an uninterrupted track record of over 15 years and accumulating more than $65 billion in assets across its swap-based ETF range. Its product lineup includes the Invesco S&P 500 UCITS ETF, which, at $39 billion, is the largest swap-based ETF in the world, according to the company.

This latest launch also expands the firm’s Equal Weight offering by adding the Invesco S&P 500 Equal Weight Swap UCITS ETF to its existing Invesco Nasdaq-100 Equal Weight UCITS ETF and Invesco MSCI World Equal Weight UCITS ETF.

USA (No) Go Home: Trump Returns to the White House and Americans to Their Offices

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Trump and economic policies
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The new U.S. president, Donald Trump, took office on January 20 and has since made his mark with key policy decisions. Among the various orders he has announced and signed is the directive for federal workers to end remote work.

“The heads of all executive branch departments and agencies must, as soon as possible, take all necessary steps to end telework arrangements and require employees to return to in-person work at their designated locations full-time, provided that department and agency heads make exemptions as they deem necessary,” Trump stated in a memorandum published in the local press.

In the fiscal year 2023, 43% of federal civilian workers teleworked “routinely or situationally,” according to the Status of Telework in the Federal Government Report to Congress from December, prepared by the U.S. Office of Personnel Management (OPM).

While Trump‘s directive may take longer than expected to fully implement due to practical or financial reasons, some companies have already begun taking the initiative.

For example, JP Morgan announced to its employees that they must return to the office five days a week starting in March, ending a hybrid work-from-home policy that was implemented during the pandemic.

Some office locations still lack the capacity to accommodate a full return of all employees, and the bank will confirm where it is feasible by the end of the month, according to a memo confirming a Bloomberg News report from mid-January.

“We know that some of you prefer a hybrid schedule, and we respectfully understand that not everyone will agree with this decision,” committee members said in the memo, as cited by AdvisorHub. However, the company argued that they believe “this is the best way to run the business.”

More than half of the bank’s nearly 300,000 employees already work in the office five days a week. For those affected by the new policy, JP Morgan said it would provide at least 30 days’ notice before requiring a full-time return. The option to work from home “based on life events” will remain available, according to the bank’s communication.

Last year, Amazon.com Inc. ordered its employees to return to the office five days a week starting in January, but the company had to delay that timeline for thousands of workers due to space constraints in some cities. Other companies have had to remind employees to comply with in-office requirements.

Elon Musk and Vivek Ramaswamy, who were at the time nominated to lead Trump‘s newly created Department of Government Efficiency, pointed out that having a full-time return-to-office mandate was an invitation for many to resign.

“Requiring federal employees to be in the office five days a week would trigger a wave of voluntary departures that we welcome,” they wrote in The Wall Street Journal, as cited by CNN.

Miami Experts: New Tariffs Harm the Economy but Are Not Inflationary

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Trump y su impacto en los mercados
Photo courtesyOfficial photo of the inauguration of the 47th presidency of the United States led by Donald Trump.

U.S. President Donald Trump announced tariffs on China, Canada, and Mexico on Saturday. These announcements reignited fears of a trade war, once again taking center stage and casting uncertainty over the future of global economic activity.

In this context, industry experts in Miami consulted by Funds Society agreed that the tariffs are very bad news for the economy, though they dismissed concerns that they are inflationary. They also pointed out that in such a scenario, everyone loses—although the United States would fare the best.

“Tariffs are bad news for the global economy; they generate retaliation, which essentially means triggering a trade war, and whenever there are trade wars, there is less growth and more complicated markets,” said Alberto Bernal, Global Strategy Director for the institutional area at XP Investments.

Bernal also noted that the U.S. president is a nationalist with a “zero-sum” view of international trade, though he does not extend this perspective to global markets.

“Trump is a fan of markets, a fan of the equity market—he likes to see U.S. stocks rise. As a result, his long-term policies focus on lowering corporate taxes, reducing business regulations, allowing for more mergers and acquisitions, and implementing changes in investment banking. All of this benefits the market,” he said. “And if it benefits the U.S. market, it benefits Latin American clients who have investments in the U.S.,” he added.

Fernando Marengo, Chief Economist at BlackToro Global Investments, pointed out that “since 1950, the world has produced three times the amount of goods and services it had produced throughout all previous human history. This is mainly due to a process of specialization and globalization, where each country focused on producing goods in which it had a competitive advantage while purchasing the rest from the global market. This globalization process led to an unprecedented improvement in the average well-being of the population. The implementation of U.S. tariffs on Mexico and Canada is very bad news.”

For Marengo, who has 30 years of experience in macroeconomic analysis, consulting, and advisory services, the outlook is “not ideal” for emerging economies: “Capital flows may continue to seek high returns in the U.S. rather than in emerging markets in general, or Latin America in particular.”

Both experts highlighted the appreciation of the U.S. dollar, the resulting weakness of other currencies, and the decline in commodity prices, which were already at low levels—factors that make emerging markets, particularly Latin America, less attractive.

According to BlackToro’s Chief Economist, volatility will prevail. The U.S. scenario, he explained, will depend on Trump’s fiscal decisions and the evolution of the trade war.

“Clearly, a trade war benefits no country in the world. When looking at the figures from Trump’s previous presidency, it is evident that import growth rates fell sharply compared to previous trends. However, exports as a percentage of GDP declined year after year during his term, meaning that this trade battle is not good news for anyone,” Marengo stated.

Given this uncertain and volatile environment, the BlackToro expert envisions an investment portfolio “possibly underweight in both fixed income and equities, maximizing returns in the short end of the yield curve. If uncertainty about inflation rates persists, the market is likely pricing in only one policy rate cut by the end of the year, making carry trades in this part of the curve highly attractive.”

If inflation risks accelerate or the trade war escalates, “alternative assets, such as gold, could become extremely attractive. However, this is not a permanent situation—it fluctuates daily based on fiscal policy announcements and, fundamentally, on how the U.S. handles its tariff and international trade policies, as well as its relations with the rest of the world,” Marengo concluded.

Initially, markets reacted negatively to the news. However, as negotiations between the U.S., Mexico, and Canada progressed, the implementation of the new tariffs was postponed.

UBS Hires Diego Pivoz in Switzerland to Cover Saudi Arabia’s UHNW Segment

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UBS and UHNW segment in Saudi Arabia
LinkedIn | Diego Pivoz

UBS AG’s Geneva office has added Diego Pivoz, formerly of HSBC.

The banker, with 25 years of industry experience, joins the firm as a Senior Relationship Manager and will cover UHNW clients from Saudi Arabia, Pivoz explained on his LinkedIn account.

“This is an incredible opportunity to join an organization I have long admired for its excellence in wealth management,” the advisor posted.

Throughout his extensive career, Pivoz has worked at firms such as Citco Corporate and Trust and Amicorp before joining HSBC, where he spent 20 years.

At the British bank, he worked in Miami and Switzerland.

Pivoz joined UBS AG on February 3.

Laura González to Join Apollo Global Wealth in May

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Laura González y Apollo Global Management
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Apollo Global Management has appointed Laura González as Managing Director of its global wealth business for US Offshore and Latin America, sources at the firm confirmed to Funds Society.

González, currently Head of Allfunds for the Americas (U.S. and LatAm), will take on her new role in May. With over 13 years at Allfunds, she initially oversaw Iberia and Latin America before being promoted to Head of the Americas in 2022, according to her LinkedIn profile.

Apollo, a firm specializing in alternative investments, has set “ambitious goals” of reaching $150 billion by 2029, a target announced during its Investor Day in October 2024.

For Apollo, González is a seasoned professional who will play a crucial role in expanding the firm’s ability to serve these markets.

“Expanding our Global Wealth business is a key priority for Apollo as we respond to growing investor demand for private market solutions that offer greater diversification beyond the traditional 60/40 portfolio model. We are committed to providing institutional-quality offerings tailored to the distinct needs of individual and wealth investors,” said Stephanie Drescher, Partner and Chief Client & Product Development Officer at Apollo, in a statement accessed by Funds Society.

Apollo’s Global Wealth unit aims to deliver a comprehensive range of alternative investment solutions across asset classes such as credit, equity, and real assets, structured in ways that prioritize the needs of end investors, the firm added.

Insigneo Welcomes Alejandro Rubinstein as Senior Vice President in Miami

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Insigneo and Alejandro Rubinstein
Photo courtesyAlejandro Rubinstein & Jose Salazar

Alejandro Rubinstein has joined Insigneo as Senior Vice President. Based in the Brickell office in Miami, he will focus on providing advisory and brokerage services to clients in the United States, Chile, Colombia, and Peru, according to a statement issued by Insigneo,.

Rubinstein, who brings more than 25 years of experience in international markets, comes from Merrill Lynch. His expertise in global financial services and focus on customized solutions for clients aligns with the company’s strategy, the press release said.

“I’m excited to be part of Insigneo’s innovative culture, where expertise and creativity combine to deliver outstanding client experiences,” said Rubinstein.

As Senior Vice President, he will leverage Insigneo’s platform of resources and services to expand his business and develop financial strategies tailored to his clients’ needs, the firm adds.

“We are pleased to have Alex join the Insigneo team,” said Jose Salazar, Market Head of Miami. “His experience in international markets complements our robust platform of services and resources. We look forward to growing together and developing his business.”