PGIM

Companies that help prevent CO2 emissions play a crucial role in the transition to a low-carbon economy. They unfairly remain under the radar of investors, argues Raj Shant, managing director at Jennison Associates, in an interview with Investment Officer.

Financial markets on Monday appeared to position themselves for a slower pace of rate hikes in the US, or even a pause, amid talk that the Federal Reserve may adopt a more cautious monetary policy following the collapse of Silicon Valley Bank. The European Central Bank this week still is expected to raise interest rates by 50 percent amid the global market turmoil caused by the collapse of SVB, which fell victim due to mismanagement of its interest rate risks. 

Economists at PGIM Fixed Income have suggested converting Ukraine’s dire debt obligations into new debt. These so-called “freedom bonds” could be backed by frozen Russian assets, according to the bond house. Such a proposal would receive great interest in Luxembourg, home to about one third of Russian assets frozen in the EU.

Eurozone interest rates will rise further in the near future as evidence grows that inflation has become entrenched, leaving the European Central Bank no option but to continue to hike its policy rates. At Ethenea, ECB watchers believe official deposit rates could more than double from current levels.

The European Central Bank on Thursday is poised to increase interest rates again. Economists and fixed income specialists expect a hike of 50 basis points - following two consecutive 75 point hikes - with markets watching for official signals that point towards further rate hikes next year.

Chances of a real turn in short-term interest rate policy seem to have been squandered since yesterday. According to specialists at Aegon AM, PGIM and T. Rowe Price, interest rates will remain high for several more quarters. A quick reversal in interest rate policy is unlikely. So is an early return to “normal” .

Most economists, fixed income analysts and investment strategists agree that the European Central Bank on Thursday will raise interest rates. The key question is: will the hawks get their 75 basis point hike? Or will doves be heard with a 50 point increase? Some still question if hiking rates into a recession is the right thing to do.

In the search for yield, some high yield investors are shifting to a broader mandate to invest in “below B”, the riskiest segment of high yield. PGIM recently repositioned two high yield funds to invest in CCC and CC bonds.

With the upcoming COP26 Climate Change Conference in Glasgow, the pressure on pension funds to green their investment portfolios increases. At the same time, the debate on fossil investments is intensifying. But what is the best roadmap: exclusion or engagement? Pension fund PME chooses option 1, while asset manager PGIM explicitly favours option 2. 

PME: disinvestment logical

Growth in the Asian stock market no longer comes from big tech companies. The best growth opportunities now lie in young, smaller technology companies and in the rapidly emerging healthcare sector, says Albert Kwok, manager of the PGIM Jennison Emerging Markets Equity Fund.