How the beginning of 2023 is gaining ground on the marketinvestors are trying to shape their portfolios so they can put the losses of 2022 behind them.
And according to the person in charge of Aegon AM in Spain, Elena Dolphinsa safe bet is to direct the money to debt-backed fixed income instrumentssuch as mortgage-backed bonds.
“(With this strategy) you end up with more diversification, because within each instrument you have 20,000 individual mortgages. And it’s also true that, in a recession situation, the first thing we pay off at the end of the month is the mortgage,” said Delfino.
“So, in a situation of stress and high inflation, consumers, individuals, they will cut some expensesbut the most important thing they will pay is the house”, he added, also reiterating that “the banks have been much more prudent, more defensive when it comes to offering mortgages in recent yearsand the market, and especially consumers, have average to fairly high levels of savings”.
An optimism that with the memory of the great financial crisis in mind, could be rejected considering that this investment strategy is a risky bet.
Dolphinhowever, he clarified that the strategy of his manager, who ultimately depends on an insurer, always seeks, in fact, eliminate the risks.
Non-interest-free mortgages and credit cards
An example of Delfino’s thesis on the search for stability within his investment strategies could be found in the fact that, according to the manager Aegon Am in Spainyour company does not purchase “bonds that have revolving credit cards as collateral.”
“We have rigorous analysis criteria of every bond we put in our portfolio,” he assured.
“Especially at the level ESGwe have very strong interest limits that can be charged and which we believe are fair,” he added.
Interest levels that, as mentioned in the podcast in which the expert participatedit is important to just know that you are not a victim of usury.
“As investors we want the people who use those cards to have sustainable interests over time and that allow them to continue using their cards, and to pay their bills at the end of the month,” Delfino clarified.
“Being cautious in this sense has protected us since 2000, when we started investing in this type of asset, and has allowed us not to have portfolio defaults,” he added.
For this, Delfino explained, 100% of bonds they include in their portfoliosgo through “a very exhaustive process of analysis”.
A strategy that can be extrapolated to stocks
This rationale that consumers may cut spending in the coming months, but will not stop paying their mortgages, is supported by the fact that, in the eyes of Aegon AMthe global economy will suffer a slowdown in its growth, which would occur starting from the second half of the year, but which would be nothing more than a technical recession.
With this premise, therefore, Delfino indicated that, apart from mortgages and credit cards, their fixed-income portfolios are more invested in bonds covered by corporate loans “very large, very diversified, in non-cyclical sectors”.
“Thus, faced with a possible slowdown in the economy, we also want to be invested in the corporate sidebut in sectors that will not suffer so much”, explained the expert.
Sectors such as pharmaceuticals, and where leisure, travel or catering would be parts of the market to avoid in the coming year.
A judgment that can also be extrapolated to a variable income which, despite coming from “a very difficult year”, can bring joy to the next.
However, Delfino has predicted that 2023 will be, still and at least in the first part, a year of value, but with a bias for quality.
“There will be greater attention to companies that have healthy balance sheets and don’t have too much financial leverage. That have constant cash flows consistent with their business, and that have a leading position in its segment“, predicted Elena Delfino.