During the CORUM L’EPARGNE press presentation, in the presence of Frédéric Pouzin (founder of the CORUM group) and Olivier Becker (bond expert), he stated that now is a good time to invest in high yield bonds, clearly chosen with care. The asset manager known for its SCPI (CORUM XL, CORUM Origin, CORUM EURION) has historically been a bond portfolio manager. CORUM L’EPARGNE has launched several bond funds, which are also consistently highly valued. If the average 2022 high-yield yield is currently negative, then there has been a reversal in the bond market. The average yield on high-yield bonds rose from 3% at the beginning of the year to 7% by mid-June. Attractive rate of return for investors.
Bond funds: real participation in the economy
Having studied the ideas received about bonds, CORUM wanted to recall the principles of bonds, the image of which in the minds of the youngest investors is often truncated. Bonds are financial loans given to companies. The latter can borrow from banks or issue their debts to the market, like states with sovereign debt. Thus, capital lent by investors is actually used by the economy, unlike stocks, which, once listed on the stock market, no longer serve the economy directly. Finally, the European bond market allowed the company to inject liquidity twice (154 billion in issues) against only 74 billion euros for the equity market (IPO).
High yield bonds, why is this the right time to invest?
Companies need funding to develop, and banks remain cautious. Thus, high-yield bonds provide an alternative means of financing for those companies whose rating (rating agencies) is not the best in the market. For investors, we are talking about loan capital with rates of return above inflation. The time has come because the current economic uncertainty is strong, banks are not inclined to finance companies whose rating is not the highest. Therefore, companies seeking credit in the bond market must offer an attractive rate of return. Opportunity for investors.
High yield bonds: average yield 7%
Thus, with interest rates rising, companies seeking credit must offer an attractive enough rate of return to attract investors. CORUM indicates that the additional margin currently applied is 500 basis points (5%) to be added to the par rate on German government bonds, the risk-free benchmark. The average yield on high-yield bonds soared in less than 6 months from 3% in early 2022 to over 7% by mid-June 2022.
And what about non-payments?
Obviously, there is no high return without high risk. The management company CORUM relies on statistics on this issue to reassure investors. The historical default rate, excluding the financial crisis, will be 1%. Once again, the bond fund manager does his job and selects bond issues. It depends on him not to make mistakes too often with supports.
How to invest in high yield bond funds?
CORUM L’EPARGNE offers similar bond funds. These funds are accessed directly through a securities account or for depositors to optimize their investment through the CORUM LIFE life insurance contract, whose various management profiles allow for the mixing of SCPI and bond funds.
- Butler’s European High Yield Bond Fund UCITS Fund (BEHY),
- Butler Credit Opportunities UCITS Fund (BCO),
- CORUM Butler Short Duration Bond UCITS Fund (CBSD),
- CORUM Butler Smart ESG Foundation (SMART ESG).
Bond underwriting WARNINGS
Subscribing to a bond means taking on the risk of borrowed capital. The annual fixed interest rate offered is not guaranteed. Investors are exposed to the following risks: risk of bankruptcy of the bond issuerliquidity risk of securities (it may be difficult to resell the securities being placed), inflation risk, the risk of changes in the price of securities being placed (for bonds with a fixed interest rate plus an increase in market rates, the lower the price of the security, and vice versa), currency risk, if the bonds refer to a currency other than the euro.