Penny Chin
Demand from superannuation funds and other institutional investors for non-Government bonds has significantly altered the risk benefit equation, according to the latest research paper issued by Tyndall.
The paper, ‘Investing in Credit Securities’, was authored by Tyndall senior credit analyst Penny Chinn, and points out the risks associated with investing in credit.
Chin said a decline in the amount of Government bonds on issue had assisted the strong growth of non-government, largely corporate, credit securities in the Australian market, with non-government bonds having risen more than tenfold in the past 10 years.
Chin said demand amongst superannuation funds meant it was not expected that this trend would abate.
However, she said the changed mix of bonds available had inevitably changed risk.
“Chin said that when the market was predominantly made up of Government bonds the primary risk to be managed was interest rate risk, but the changed composition of the market meant credit risk had become increasingly important.
“Specialist bond fund managers have learned to adapt to the changed market by employing credit analysts to measure credit risk exposure,” she said. “But it is a difficult and complex task for direct investors.”
