Aegon Asset Management

In the latest Strategic Thinking video, Colin Finlayson, co-manager of the Aegon Strategic Bond strategies, examines recent dynamics within the fixed income market, particularly the divergent performance between government bonds and corporate bonds. He discusses what’s driving this dynamic, if it’s likely to continue and what this means for the Aegon strategic bond strategies.

Rising rates have led to attractive yields across the fixed income market. However, corporate credit spreads are tight. This leaves many investors grappling with the valuations conundrum, as they debate yields versus spreads to determine their fixed income allocations. Will slowing economic conditions result in spread widening? Do higher yields provide a sufficient cushion against downside risk? And is now the time to add fixed income exposure?

Since its launch in 2014, the Aegon Diversified Income Fund has delivered an average level of income of 5.2%* per annum despite the challenges of the macro environment. This was also a decade when investment practice and the regulatory framework around ESG saw great change.

2024 sees the Aegon Diversified Monthly Income Fund reach it’s 10-year anniversary, and with it an enviable track record of successfully delivering a yield that has averaged more than 5%*, irrespective of the macro and market environment. 

Much was written about the ‘Magnificent 7’ last year and rightly so - the cohort of US mega cap, tech related stocks accounted for around 80% of the total returns of the S&P 500. But there was another Magnificent 7 that was much closer to home for the Aegon Global Equity Income team. 2023 saw the Fund post its seventh consecutive year of above median performance versus its Lipper peer group*, which is an achievement we are very proud of, especially given the range of market conditions faced over that time.

The final two months of 2023 were among the strongest on record for global bonds. The catalysts were expectations of imminent global central bank easing combined with growth holding up quite well. The result was that all asset classes fundamentally repriced the investment outlook, and bonds were not left behind.

There have been two standout themes in global equities in 2023: the outperformance of the so called 'magnificent seven' US mega-cap tech stocks (without which US indices would have underperformed), and the Japanese stock market. There were also two standout underperformers - China and the UK. Will these trends continue in 2024?

Colin Finlayson, Euan McNeil and Thomas Hanson from Aegon Asset Management’s fixed income team take a closer look at the prospects for Sovereign Bonds, Investment Grade Credit and High Yield Credit in 2024.

The Aegon Diversified Monthly Income Fund has always evolved to meet the challenges and  opportunities of the economic cycle. The availability of income today allows for asset allocation decisions that would have been unthinkable when rates were close to zero.

As the Aegon Diversified Monthly Income Fund approaches its 10th anniversary, we reflect on the resilience of a multi-asset income strategy through the rollercoaster of Brexit, Covid, war, and the end of quantitative easing.

Although caution is warranted, high yield continues to offer attractive opportunities.

A soft landing or a hard landing? As we look to 2024, markets are still searching for an answer to this key question. In the minds of many investors either of these two very distinct outcomes has a high probability of occurring. Yet they would lead to diametrically opposite asset allocation decisions, so trying to solve categorically in favour of either could leave one exposed to substantial risks in the event of being wrong.

Each month the team behind our sustainable equity funds answer five topical questions in five minutes – or sometimes a little over! They tackle questions on sustainability issues, introduce new stocks and discuss the impact of market conditions.

In the latest Strategic Thinking video, Colin Finlayson, co-manager of the Aegon Strategic Bond strategies reviews what was a very challenging month for global bond markets, but why he believes the peak of the interest rate cycle and falling inflation make the outlook even more attractive. He also gives an update on how we are allocating against this backdrop and discusses why flexibility will be key.

We were happy to see a new application of our adopted principle: “The greenest building is the one not built”. Not so long ago we read that the approval for demolishing and rebuilding the M&S store on Oxford Street, London had been refused by the secretary of State, Michael Gove. The main argument was that it: “fails to support the transition to a low carbon future and would overall fail to encourage the reuse of existing resources, including the conversion of existing buildings”. Ironically, we also read about a just-completed residential development: Mast Quay Phase II, which is to be demolished as ordered by the local council, although in this case it is the developer that aims to keep the building intact (surely for economic reasons). The tables have turned. Nonetheless, in helping to settle this latest issue, we would like to quote the senior director at Expedition Engineering: “did anyone stop for a second to consider the waste of embodied energy”.

In the latest Strategic Thinking video, Alex Pelteshki, co-manager of the Aegon Strategic Bond strategies, discusses why bonds are back, after years of quantitative and monetary easing causing traditional income asset classes to be squeezed out.

Last week’s announcement by the UK Prime Minister to amend the UK’s net zero strategy, was disappointing from an environmental perspective. Among the changes announced was a delay to the ban on the sale of new internal combustion engine cars and gas boilers until 2035 from 2030. The measures have been widely criticised by climate activists and business leaders alike and must call into question the UK’s position as a global leader on climate change.