Due to low and negative interest rates across the globe, investors are on the hunt for yield.
So help them get exposure to a combination of assets that have attractive risk premiums, says Luc de la Durantaye, managing director of asset allocation and currency management at CIBC Asset Management. He manages the Renaissance Optimal Inflation Opportunities Portfolio.
To do that, he adds, help clients evaluate “the spread between either the interest rates or the dividend yields that are being offered, relative to sovereign bond yields.”
Currently, some emerging market bonds looks promising, says de la Durantaye. Compared to developed markets, “Mexican [government] debt is very low, for example, and its yield curve is very steep. [And], some quality, emerging equity markets are at more attractive valuations.”
While emerging markets face challenges in the short term, he adds, “in terms of valuation, they’re less risky than some of the defensive, high-yield stocks that are trading at very high multiples.”
But, de la Durantaye suggests investors balance their exposure to high-yield, and to some corporate bonds and emerging markets. As a safety measure, people can keep cash on hand and, if suitable, consider investing in gold.