“After the Brexit vote, UK bonds and Eurobonds issued by UK companies suffered. But when the BoE announced they will buy £10bn worth of sterling corporate bonds, they rebounded. £10bn may not sound like a lot, but the amount of eligible bonds for the programme is only £50bn. So 20% of the whole market will be bought by the BoE over the next 18 months.”
But what about the currency risk? That will undoubtedly stop many an investor from testing the UK bond waters, as British PM Theresa May convincingly showcased her ability to talk down sterling in recent days. Hedging could provide a solution though.
“Hedging costs for euro investors haven’t gone up since Brexit,” claimed Patrick Marshall, head of private credit at Hermes Investment Management, who also spoke at the forum in Copenhagen. “My view is that there is an arbitrage opportunity, especially at a time when sterling is quite low. I recently met a German investor who is moving money from direct lending in Europe to direct lending in the UK because yields are higher over there.
Overall, investing in private lending and other illiquid credit solutions is gaining ground in Denmark (like it is in the Netherlands). A third of Danish fund selectors attending the forum said they plan to increase their allocation to such assets over the next 12 months.
Click here to see a full overview of delegate voting results from Expert Investor Denmark.
And here you can see a selection of photos taken at the event.
