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Eye of the storm?


After what proved to be something of a "perfect storm" for the asset class last year, what does 2023 have in store for credit? A more nuanced market, the aftermath of the pandemic and the current rising-rate environment, coupled with elevated volatility, are all likely to be key influences this year.

At the start of 2023, and for the first time in years, credit markets potentially offer a way to achieve long-term return objectives via income alone, without the drawdown risk inherent in equity markets. In addition, from an asset allocation perspective, the traditional role of fixed income as a diversifying asset seems to have been restored, with the potential for meaningful returns from the asset class if central banks were to ease policy in a future downturn.

Elevated levels of volatility, combined with structural changes in some sectors, could also create the perfect environment for active management, potentially allowing value to be added via sector and stock selection.

Adam Whiteley, portfolio manager, Insight Investment

Bond ratings reflect the rating entity’s evaluation of the issuer’s ability to pay interest and repay principal on the bond on a timely basis. Bonds rated BBB/Baa or higher are considered investment grade, while bonds rated BB/Ba or lower are considered speculative as to the timely payment of interest and principal. Credit ratings reflect only those assigned by Nationally Recognized Statistical Rating Organizations (NRSRO) that have rated fund holdings. Split-rated bonds, if any, are reported in the higher rating category.


All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

Bonds are subject to interest rate, credit, liquidity, call and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes and rate increases can cause price declines.

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