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How to handle liquidity risk in a high yield portfolio

As rates rise and credit comes under pressure, selecting the right fixed income assets is key to optimising returns while managing risk. However, the liquidity picture for high yield assets, which have lower credit ratings than investment grade bonds, is harder to handle. Liquidity is key to trading out of positions as well as acquiring assets.

Tom Hanson, head of European high yield at Aegon Asset Management, tells us how liquidity in these bonds has been performing in 2023, the risks that liquidity management can create in the investment process, and the value of traders, as part of the investment process to support high yield investment.