The assets managed by DWS Invest Euro High Yield Corporates have exceeded the EUR3 bullion mark. Since its launch in July 2012, DWS’ flagship fund for European high-yield bonds has been managed by Per Wehrmann, Head of European High Yield at DWS.
In the current calendar year the fund has significantly recovered from the market slump in March. On the one hand, this was a result of the massive monetary policy incentives provided by the European Central Bank and the Federal Reserve. “But on the other hand, thanks to the good single bond selection and allocation, we also clearly outperformed the benchmark” says portfolio manager Wehrmann.
Even after the rally of recent months, he sees further potential for European high-yield bonds.
“The market is benefiting from the immense support from the European Central Bank and government aid programs, so the default rate is much lower than originally feared. We are currently finding good opportunities, for example, in issuers that are not particularly badly affected by the coronavirus pandemic, but whose bonds are still rated “CCC” because they are subordinated in the capital structure, for example. There the yield premiums are still relatively attractive” says Wehrmann.
He also sees opportunities in “CCC”-rated issuers that could either be taken over or sell assets, which could have a positive effect on credit quality. With regard to individual sectors, the portfolio manager currently favours issuers from the chemical sector: “The coronavirus pandemic is naturally having a negative impact on business there as well. But the companies have stable balance sheets, and the sector is also comparatively well positioned structurally, as the substitution risks are lower there and the industry is already relatively well consolidated” explains Wehrmann.
The portfolio manager considers the bonds of major “BB”-rated issuers, which dominate the market for Euro-denominated high-yield corporate bonds, to be basic investments, which accordingly account for a large share of the fund.