Faced with persistent market volatility, the normalization of monetary policy, and a macroeconomic environment that varies by region, private investors must adapt their approach to bonds. Étienne Gorgeon, Head of Fixed Income Management at Sanso Longchamp AM, shares his insights on building robust, balanced, and high-performing portfolios.
With rising long-term rates and the gradual withdrawal of institutional buyers, do sovereign bonds still play a central role in wealth management portfolios?
Against a backdrop of persistent government deficits and central bank disengagement, sovereign bonds are struggling to offer sufficient returns relative to the risk taken. Their historical role as a defensive pillar of wealth management portfolios is being called into question. Corporate bonds—particularly short-duration investment-grade bonds—and high-yield bonds now appear to be a more attractive alternative, offering better yield and diversification while limiting exposure to long-term rate volatility.
Inflation now appears to be entrenched in certain sectors of the economy. Should it be incorporated as a central scenario in future asset allocations? And how?
While some Anglo-Saxon economies show persistent price pressures, the picture is more nuanced in the eurozone, where core inflation is gradually easing. It would therefore be premature to make this a universal central scenario. In this context, asset allocation must remain flexible: incorporating targeted inflation hedges (such as high-yield bonds) without overweighting this risk at the expense of other factors (economic slowdown, prolonged monetary tightening). A balanced approach, guided by a macroeconomic analysis differentiated by geographic region, seems more appropriate.
Corporate credit, short duration, geographic selection: what filters should be used to identify the right issuers in such an uncertain environment?
In a European environment characterized by receding inflation and strengthened fiscal support (German and European plans), growth remains a key driver of credit. The allocation favors short-duration corporate credit, which is less sensitive to rate volatility while offering attractive carry. High yield, rigorously selected, remains a relevant source of return. Selectivity is key: balance sheet strength, cash flow visibility, competitive position, and sector exposure are the essential filters for capturing opportunities while managing risk.
More broadly, how does Sanso Longchamp AM adapt its bond strategies to meet private clients’ needs for returns, visibility, and protection?
Against a backdrop of monetary normalization and persistent volatility, Sanso Longchamp AM focuses its bond allocations on private debt offering an attractive risk-return profile. Our approach is based on rigorous selection, led by our credit and fixed-income teams, to identify short-term corporate bonds, both investment-grade and high-quality high-yield. This strategy allows us to capture returns while minimizing interest rate and credit risk. Diversification and in-depth fundamental analysis are at the heart of our management approach, designed to meet private clients’ needs for visibility, performance, and stability.
