Marc Lansonneur of Societe Generale Private Banking explains some of the products and strategies – as well as considerations – for investors to enhance yield and generate income for their portfolios.
Date: Apr 2012
A good time for yield
According to Lansonneur, risk aversion deters a lot of people from investing, so this makes now a good time to be looking at yield-enhancing products and strategies for those investors who want to find new opportunities.
In particular for equities, he said there are some interesting opportunities – especially in Europe – in terms of valuations, yield and credit standing.
Vehicles to access income products
Credit-linked note structures, for example, enable investors to replicate the bond performance but with a short tenor, he explained.
Considerations with income products
There are certain considerations for Asian investors when looking at income-enhancing products, said Lansonneur, especially in cases where they might be buying yield products, such as bonds, without being fully aware of all the risks.
For example, the European high-yield sector is considered to be risky, so while people will invest in it, they will do so only for a certain percentage of their assets. In Asia, however, Lansonneur said some investors consider some high-yield paper to be as safe as US or European government bonds.
It is therefore important to reassess investors’ risks in terms of their portfolios, in terms of liquidity and counterparty risks, he said. For equities with dividends, investors should not only look at the dividend yield, but also at the credit outlook of the company.
These can provide exposures to various equity indexes, with yields potentially of 12% to 15% per annum, and downside protection of 25% to 30%, he said.