Fixed income in a low interest rate world.
Fixed income has changed. The days when adding debt to your portfolio meant gilts, investment-grade corporate bonds or, if you wanted a little more excitement, junk are gone.
The low rate environment that resulted from the financial crisis has forced institutional investors to take more risk to generate the cash needed to pay their members’ pensions. And it seems that they need regular income streams now more than ever before.
Cash-flow negativity is sweeping through the UK’s institutional investment market. Indeed, three out of four defined benefit schemes pay-out more to members than their investment portfolios generate. It is a problem that is expected to get worse.
In response, schemes are ditching equities – 20% in 2019, down from 50% in 2010 – to focus on cash-generating assets, such as property and debt. Yet with interest rates hovering around historic lows, gilts and highgrade paper rarely return enough to pay the bills anymore.
The size of the problem can be summed up by corporate bonds. More than a fifth of such debt globally had a negative yield at the end of last year, while more than half (51%) of investment-grade debt issued in 2019 was placed at the lower end of the risk spectrum (BBB).
But a lack of yield has not meant a lack of opportunity. Institutional investors are looking more to asset classes that were once labelled alternative, such as lending money directly to smaller companies or loans secured against property or infrastructure assets.
With the risk and liquidity profile of assets that schemes are adding to their debt portfolios changing, as are the size of their exposures – 54% in 2019, up from 41% in 2010 – we brought a group of asset owners and fund managers at various ends of the risk spectrum together to discuss how institutional investors are using fixed income in 2020.
From left to right: Jim Cielinski Global head of fixed income, Janus Henderson Investors / Julien Halfon Head of pension solutions, BNP Paribas Asset Management / Duncan Willsher Trustee director, 20-20 Trustees / Alan Pickering, President, BESTrustees / Mark Wilgar Investment director, credit investments Cambridge Associates / Ben Shaw Director, HNW Lending / Derry Pickford Principal, Aon
If we held a discussion on fixed income 15 years ago this panel would have looked very different. It would have almost exclusively been attended by sovereign debt and investmentgrade bond fund managers with perhaps a junk specialist. The financial crisis changed that. So to understand how investors are using fixed income assets in the lower for longer environment, we brought traditional bond managers together with asset owners, their consultants and those lending money directly to smaller companies.
Portfolio Institutional: How are fixed income investors navigating this low interest rate environment?
Alan Pickering: We were told to expect lower for longer, but it looks like being even lower for even longer.
It is important that trustees decide what they want a fixed income asset to do. Is it to preserve value or generate income? Is it to generate income now or in the future?
Trustees must align their fixed income investments with their liabilities and have cognisance of the timetable within which they need to meet those liabilities and what the ultimate journey is. Is it to transfer risk to the insurance market?
It is an area where trustees need to be regularly trained because what we learnt last year may not be appropriate this year.
People used to say that fixed income was the boring piece of the jigsaw, but it is now one of its more challenging parts.
Duncan Willsher: You need to take a scheme specific approach to what you are trying to do, but the trend is that populations are ageing. It doesn’t matter if you’re going to run the scheme off by yourself, pass it to an insurer or, for defined contribution (DC), have a stable capital base in retirement that has some income coming off it. Irrespective of the individual path you take, they all point towards fixed income and that presents challenges in sourcing assets.
Many trustees, when they step away from corporates, struggle to understand what some of these less common assets are. There are challenges.
Jim Cielinski: There is a shift in what role fixed income plays for broader portfolios. Their role as a diversifier, which was held for so long, has now transformed to a blend of income and diversification.
The ability of bonds to go up in value while everything in your riskier portfolio goes down is now limited at today’s low rates. Returns are not going to be what they once were. Theory tells you that if you lack a good diversifier, you should be de-risking, but that’s a challenge if your scheme needs a certain return.
The role of fixed income is shifting. It still gives diversification but controlling the downside while providing a reasonable income is what clients are demanding.
Investors don’t want the lowest yielding assets because it doesn’t work in their model; yet going too far out on a limb increases the correlation of their bond portfolio to equities. And given the current level of rates, they are probably better off owning more equities.
It is a tough balance. Balancing risks and low fixed income yields to meet a client’s risk and return objectives is difficult in today’s rate environment.
Julien Halfon: Things are getting more complex as schemes start using instruments in a different way than they used to. The move to illiquid assets to get more return is a clear example of this trend. A massive share of the corporate world offers negative real yields, while illiquid credits, such as infrastructure bonds, have a positive spread above inflation and gilts. They are not purely illiquid as they are also cash generating, which is an interesting situation.
Infrastructure debt, real estate credit, mid-market loans and SME debt tend to amortise fast and are not that long dated. So, by year four or five, a 10-year loan could get more than half of its money back through coupon payments and capital amortisation.
At the same time, private credit is also an instrument that people have started using in the DC world.
For years, everyone was saying that DC investments should be liquid, but as we saw with Nest last year, DC schemes have started investing in illiquid credit as they want something slightly different. People are getting more sophisticated and understand the complexity of what they are doing. They are adding new dimensions (like liquidity) to their traditional overall objective and risk tolerance approach.
Looking at the numbers, the next crisis will emerge in corporate credit.
Jim Cielinski, Janus Henderson Investors
Mark Wilgar: Investors are using the full breadth of fixed income assets that are increasingly seen as an alternative asset class, in some regards, to the hedge funds a lot of investors are frustrated with.
Different or esoteric areas of fixed income investing are growing in popularity and there are a range of objectives as to why people allocate to fixed income. It isn’t necessarily just defensive anymore.
PI: When moving beyond investment-grade corporate bonds, what are fixed income investors looking at?
Ben Shaw: More illiquid and unusual debt strategies. Pension schemes are coming into private debt, which is by its nature illiquid.
The pension schemes I am involved with are steering away from funds to choose their own high-yielding debt investments. This gives them debt with an equity hat on to try and get good real yields for taking some risk. It’s a combination of illiquidity and careful stock selection.
Halfon: There’s an opportunity for advisers and pension funds to work together to mine the balance sheets of banks, who are still deleveraging 10 years after the crisis by selling loans.
Alternatively, asset managers can also set up platforms for direct lending to SMEs. We have something at BNP Paribas Asset Management that allows us to do exactly that. We can also insert additional filters for ESG or impact investing, for example. We do this via our own platform because it makes more sense than using intermediaries.
So in summary, you could access dozens of mid-market and SME loans either processed by the careful scrutiny of banks or potentially directly through an asset management platform. This is what we refer to as a dual origination engine, which allows clients to get a lot more bang for their buck.
Shaw: You need to find clients who can’t get a loan from a bank or use the bond market. By accessing that for investors you get a premium.
PI: Is that illiquidity premium disappearing as alternative forms of debt become more popular?
Shaw: It is still there, but at the higher end of the spectrum – the £100m plus loans – it’s more challenging to find. The smaller you get, the easier it is to find those opportunities.
Wilgar: That’s also why you see more asset-based lending strategies. It is harder to manipulate the underwriting. You have an asset security which is more intuitive and harder to undermine with how you write the documents. That is part of that popularity. You have to be selective. There are traps. In some meetings with private debt managers they boast about how they manage to convince people to borrow from them. That mentality is natural in a late cycle, but you need to think about what you’re investing in more than you did in prior years.
Pickering: There are a variety of reasons why the users of capital are tapping the private markets. It is not just banks’ deleveraging; there are reasons why they don’t want the scrutiny of the public markets. Some of those reasons may be aligned with us, some may be somewhat distasteful to us and might increase the risk we are taking. That’s why most schemes are going to have to go through funds rather than have a direct relationship with the seeker of capital.
It’s only through collective funds that most of us can get the spread of risk and diversity we want. As schemes consolidate in defined benefit (DB) and DC there will be an increasing trend for pension schemes to appoint their own chief investment officer and when that happens there may well be a true peer-to-peer market where the user of capital goes straight to the provider of capital.
I’m not sure if I have ever believed in the notion of an illiquidity premium.
Mark Wilgar, Cambridge Associates
Halfon: The role of an asset manager is evolving. At one point, a pension scheme’s in-house team did most of the work but now asset managers are evolving to become part of a scheme’s trusted adviser group.
Pension schemes don’t necessarily feel confident or comfortable doing everything themselves anymore. There is a need for a chief investment officer to be the link between the investment strategy, the investment guidelines, especially in our ESG-conscious environment, and the external world.
It’s also part of the overall governance improvements. Schemes’ are becoming cash-flow negative and cannot afford mistakes, so they are working closely with consultants and asset managers. Everybody is getting closer.
We have seen this evolving very fast in more specialised segments of the investment universe, such as direct lending. In the past you would almost exclusively invest in listed securities and could check the prices on Bloomberg or Reuters, making it easier to meet any governance requirements. It is less the case now with unlisted prices where there is a component of art on top of the science.
Cielinski: It is hard to see this move toward illiquids going away. Part of the reason is low rates and part of the reason is that too many people are paying excessively to over-own liquid assets. That is an insurance policy most people don’t need.
Directly lending to smaller companies with higher costs of capital and thinking that there won’t be a risk event is a mistake. This trend, whilst is not going away, is not a free lunch. As the cycle matures, a lot of the companies borrowing money will prove to be troubled credits. We will see that in the next cycle.
Credit risk is always there, that part hasn’t changed, but it’s hard to see a shift in the trend towards looking for more yield and giving up a little bit of liquidity, because most of us don’t need it.
Halfon: When it comes to funding from banks, all companies are facing a struggle at the moment. Therefore, institutional investors are redirecting some of the flows to the medium-sized and smaller companies. In the long-term, the spreads embedded in direct loans may come down, but for the moment they seem to be stable.
You still get a lot of value for anything under BBB, for example BB or B+. If you look at historical defaults, BB- and B+ have, in normal circumstances, more defaults and slightly lower recovery rates than big companies. During the crisis they had lower defaults because the banks had stopped lending to them before the crisis.
So in extreme environments, SME loans don’t suffer as much as big companies. You have a risk/return profile which is attractive for long-term investors.
Shaw: What’s interesting is when you get down to the smaller loans, you can get asset backing to those loans. Directors put homes and factories as additional security which is meaningful when you have small loans.
Wilgar: You can get more transparency on the borrower by seeing more of the financials because of that direct communication channel.
It is a different risk. As the private markets open up even more, we are seeing the different types of risk you can access through a closed-ended structure. That is where you get onto litigation finance, some of the more structured, secured assets, different types of bank balance sheet financing, the parts of the market that add value. It is different risk as much as riskier.
Halfon: If you add private debt to a traditional asset allocation of 30% equities and 70% bonds, you start to play around with its riskreturn profile. By switching 20%, 25% of equities or traditional bonds to illiquids you not only change the volatility and return but the overall cash-flow produced by the invested assets also changes quite fundamentally.
A lot of DB schemes are coming to the end of their life and so cash-flow management is pretty much a requirement, while for DC schemes it can provide a yield pick up over the long term.
PI: When someone says direct lending these days it is usually followed by the term “cov-lite”. Has increased competition in this asset class made riskier assets even riskier?
Shaw: We have seen lenders fighting for a deal and so the price becomes economical in its risk. That’s particularly in the larger transactions.
Halfon: Back in the infrastructure equity bubble before 2008, the world was chasing the same infrastructure projects and the prices went up and up and up.
In the $100m to $200m deals, you have a lot of competition. You have a similar amount of work for a $10m loan as for a $100m loan, which has a higher profit, but you have more competition. So then larger size loan has become a more difficult segment of the market.
I am slightly sceptical about this idea of the illiquidity premium being purely a premium for illiquidity.
Derry Pickford, Aon
Wilgar: The sophistication of the borrower comes into play less when you have private equity sponsors who are the borrowers. They are savvy, they know what they are doing and can be aggressive in forcing underwriting standards down. Whereas if you are lending to a family company, someone who’s more interested in building relationships and less willing to spend the time and effort to drill down and mess with the underwriting, then you potentially get things that are more defensive and you can expect to pay back more in a recovery scenario.
Cielinski: Credit cycles are defined by having a lot of debt. But then something must hinder access to capital and then there is an earnings or cash-flow shock. If you get those three things you have a crisis. Without all three, however, you don’t.
My point is that fiscal and monetary policies are working. Real rates being low or negative for corporate borrowers has largely erased the issue of access to capital. Risk in credit has declined as real rates have declined and the volatility of real rates has declined. That’s why it was a concern last year when the Fed started tightening.
Without question, the advance of cov-lite would lead you to think that credit risk is higher. The underwriting standards, as it happens in every credit cycle, have deteriorated and so there will be a day of reckoning, but that’s been accompanied by policy which truly reduces default risk. We shouldn’t forget that.
I’m not sure credit risk has moved meaningfully higher, which is probably why spreads remain so low. The market knows that although there’s a lot of debt out there, default rates are low. That’s probably because of the policy backstop.
Pickering: As a trustee, it’s important to differentiate between my defined benefit clients and my defined contribution clients.
In the context of a defined benefit scheme, I am helping the shareholder meet the promises that their predecessors made. That is a business-to-business relationship and the extra 0.01% of a large amount of money might be a premium worth paying for extra risk.
In the defined contribution world, I am looking after the members and the profit and loss go straight to the bottom line. It is important that we explain to policymakers that a defined contribution pension scheme is a pension scheme, not a savings vehicle and therefore it can be seen as a long-term relationship between the customer, the trust and those using the money before the members needed it.
People used to say that fixed income was the boring piece of the jigsaw, but it is now one of its more challenging parts.
Alan Pickering, BESTrustees
I get worried when people talk about having early access to pension schemes. I am trying to invest DC money over 20, 30, 40, 50 years. They don’t need daily liquidity. DC members shouldn’t be day traders. They should be cash-flow positive, particularly in the UK as some form of auto enrolment is going to be with us for quite a while.
We can be patient investors, but we don’t need to be cutting edge investors since for most ordinary people the pain of losing money dwarfs the pleasure of making money.
If we can find ways of avoiding this catalyst of 60 or 65 years old, which means nothing in the lifecycle of a DC member. We ought to find ways and develop products that look after them from 18 to 98 and avoid artificial catalysts for changing from one form of investment to another.
Derry Pickford: I am slightly sceptical about this idea of the illiquidity premium being purely a premium for illiquidity. In fact, there isn’t a huge amount of disguised risk here.
We have all seen the figures about this huge explosion in the size of direct lending and it’s been untested through a full credit cycle. No one knows what the true risk of this lending is going to be and whether there is a fair compensation for some of this illiquid SME lending.
I might be wrong. It could be that when this credit cycle ends, because we know that there will be an economic downturn, SME credit does better than cynics like me think. Nobody knows the answer to that and caution is wise at this point, especially as we are getting towards the end of the cycle and spreads don’t seem that exciting once you have paid manager fees. We don’t know what the credit losses are going to look like when we get that downturn.
Halfon: We have some analysis on the spreads. In SMEs you can get about 700 to 900 basis points above libor, and sometime more, net of fees. Basically, you are doubling the size of your loan portfolio every six to nine years.
Historically, the average level of default is around 1% to 2%. If the economic environment gets very bad, we will probably have other things to worry about, like hunting for food. The extreme scenarios are probably very far out, but many of those SMEs have pledged assets like houses and a downturn could materially impact the lives of the entrepreneurs.
Pickford: In 2008, the epicentre of the credit crisis was not corporate loans or SMEs. The danger is that the epicentre of the next crisis shifts to where we’ve seen credit build up.
Sometimes we see attractive spread offers, but from the economics side of this, the risk is quite uncertain because it is an unprecedented cycle. We don’t know how it’s going to evolve. Therefore, when we allocate to private credit, we tend to like cautious managers. When looking at bank capital relief, it looks an attractive risk/ return-trade off, but some of the riskier untested business models look more questionable.
Wilgar: I’m not sure if I have ever believed in the notion of an illiquidity premium. If something as definable as that does exist, then it is not necessarily always a premium. It can be negative. At the end of 2018, the illiquidity premium was probably negative. On a risk-adjusted basis you would have been better paid for high-yield credit. It comes in waves and troughs and is not reliable.
Pickford: It’s certainly time bearing. If the illiquidity premium exists, it is relatively depressed at the moment, perhaps not as depressed as it was at the backend of 2018.
Cielinski: You need to make sure not to confuse the illiquidity premium with true credit risk. There has been a tendency in the past few years to believe that anything illiquid yields more. Disruption is setting new peaks and the ability to forecast if an SME will be around in five to 10 years is as low as I can remember. This is the disruptive force that we are seeing in many industries. As a believer in sectoral economics, you seldom find the next crisis occurring in the same place as the last one. You get a build-up either in the consumer sector, the corporate sector or the government sector. When one blows up, as the mortgage lending area did in 2007, it leads to the next “blow-up” occurring somewhere else. Looking at the numbers, the next crisis will emerge in corporate credit. That’s different than saying we are right on the cusp of it, but we know where the debt is building up.
Like a lot of the behaviour we are talking about, even though it’s rational, it’s indicative of the late cycle behaviour that has historically produced bubbles. You should expect that at some point this happens in the corporate space as it is hard to see how it isn’t next in line.
We have seen lenders fighting for a deal and so the price becomes economical in its risk.
Ben Shaw, HNW Lending
Halfon: There’s a debate on which of the bubbles is going to burst first. US equities have been massively overpriced. So are government bonds, and then there is the real estate market.
What worries me is when you compare sectors, you realise that interest rate implied volatility is quite high. So people are expecting rates to go back up even though this is not happening in practice.
Implied volatility for equities is back down, not to the level of 2006 but closer to the levels of 2013 to 2015. This is extremely low when the markets are really high and a small shock could make a lot of damage at that level.
Equities seem to be in a worse shape for potential developmental bubbles than the direct private debt market, where demand remains strong. A lot of the lenders know this, and the spread being slightly reduced is not changing anything. The technology screening which SMEs undergo has improved tremendously. The platform, the discussion with auditors, with certified accountants, everybody is part of the same chain. So by the time you get to the lending stage, you know the SME inside out and have almost as much information than you would have on a big company.
Shaw: People underestimate how much banks have withdrawn from this sector in the past 10 years. It doesn’t mean that the credit is bad, it’s just that banks have withdrawn from it and left a vacuum that private debt is now filling.
Willsher: Where we are getting to now, especially as portfolios shift to something that looks more like 100% fixed income, is that trustees are having to choose illiquid assets. Where they are not keeping pace with the sophistication of their portfolio is understanding the risks. It’s difficult to tie down what risk is going to blow up, but trustees don’t have a proper holistic picture. They don’t understand when using multiple managers where they are doubling up exposures to individual entities. What are our country risks? What are we exposed to? Which organisations are we exposed? Most trustees cannot answer those questions.
PI: Where can value be found in the alternative side of credit?
Shaw: At the smaller end of the market, on the illiquid side. Bonds for SMEs do not trade at a particularly attractive rate compared to investing privately.
Wilgar: The most interesting private investments are where fewest people are trying to sell product investing rather than investments. That is ultimately what’s driving the supply and demand dynamic these days.
Anything that sounds interesting or different or has a viability to it, isn’t an off-the-shelf, easily repeatable process. That’s where there is interest.
Bank balance sheets is an interesting area. Allocations to trade receivables have lagged the rest of the market in terms of banks pulling back and people being able to source that risk. That is growing.
At this point in the cycle, you need look in harder to find places to find the risk, but that doesn’t mean they are always good investments. They are also more complex to understand and less predictable.
It is difficult for people to understand a lot of those risks, which can be a barrier to entry and affects the supply and demand dynamics. As an adviser or someone looking for new ideas, there is risk with you recommending it to them, so it can be tough in this environment to endorse those types of ideas.
Cielinski: Value is not always in the harder to find places. Emerging markets and asset-backed subordinated loans in the US look quite attractive and there’s been no real debt build up.
Then increasingly, there is the ability to talk about solutions with clients. Can you write options to increase yield or are there other strategies that protect downside for a certain level of income? Portfolio construction may be more important than simply asset class allocation.
There are opportunities now in how you craft and construct portfolios that can offer good returns. It’s not just about stretching for the more illiquid and more alternative asset classes to get yield.
Historically, the average level of default is around 1% to 2%. If the economic environment gets very bad, we will probably have other things to worry about, like hunting for food.
Julien Halfon, BNP Paribas Asset Management
Halfon: Using derivatives can sometimes lead to increased complexity. There is value there, but the choices you have to make can require a lot of analysis and must be well thought through.
Wilgar: Ultimately, with fixed income being risk asymmetric it is not a place to take bets. There’s no way you should gamble on this being your alpha driver or being the next big thing, because the numbers will tell you that you can only lose 100% and some yield.
Shaw: That’s not true. If the analysis is right, you are getting 600 to 900 basis points above libor.
Wilgar: It is a balance. You need to have faith in something if you are a portfolio allocator because that fundamental risk asymmetry still overrides your thinking on what is a good idea.
Shaw: I disagree. If you’re treating fixed income correctly, you’re treating it as an income-seeking asset by investing in parts of fixed income that could drive returns for an acceptable level of risk. Don’t treat it as a traditional gilt, which is how people looked at all fixed income years ago.
Wilgar: I agree, but there’s a tipping point and I don’t know if many yields today reach that tipping point where you can earn enough long term for the liquidity you give up to invest in some areas of fixed income.
Halfon: Illiquidity is an interesting concept in private debt. The assets may be illiquid, but they are a lot more cash generating than people assume. SME loans can return 7%, 8% or even 12% in some cases, so you get a lot of cash out of the coupon payments as well as the capital amortisation. On an eight-year loan, you could get more than 50% of your capital back in four years.
Pickford: The things I have seen with coupons that high have been leveraged.
Halfon: This is on a purely unleveraged basis.
Pickford: After fees, what coupons are investors receiving?
Shaw: Double digits.
Halfon: You get a spread of 10.5%. If you add leverage, and I wouldn’t recommend it, you could add 10%, 20%. Don’t go for a crazy leverage that you get in LDI that returns 3% or 4%, which can blow up at some point.
If you get in early, you get a nice return for five years. Even if there is a default at that point you have received more than your money back.
Shaw: The loss severities are not extreme. When you do get losses, they are not enormous. You are not writing off the whole loan. We have not written off more than 15% so far. So if you are getting a low double digit return, it’s very income generating asset.
Willsher: We have to accept that yields are low. If you want certain characteristics in your portfolio, you might have to pay for them. That’s the way the world is.
Wilgar: The common theme you can take from the private side and across the fixed income markets, perhaps across markets more broadly, is the idea of being less compensated for incremental risk. That applies in its extreme when you go to the traditional buy and maintain CDI portfolios where we don’t know if we are necessarily getting paid enough for the corporate credit risk we are taking.
When you add management fees on top of that, it’s an interesting conversation. It is well publicised that a lot of the alternative credit strategies are more strategic and are doing things investors do not expect, maybe they are illiquid and have high complexity. A lot of that pressure and strain comes from the need to meet your own fees, to be able to pay for yourself.
It’s a better option than passive credit, which is a bad idea. It’s also less tied to benchmarks. There is not an intelligent reason behind why credit benchmarks are the way they are. If you go back to the fundamentals of defensive credit, it’s low costs but not benchmark constrained.
Pickering: I hope this debate doesn’t stand or fall on whether there is or is not an illiquidity premium. An illiquidity premium is something that marketing departments like because it fits into an advertisement space.
It is no longer simply bonds or equities, there are several ways of tapping into the wealth that society creates. We can help with that wealth creation rather than just tap into it. For me as a trustee, there are many dimensions that determine what is the most important strategy and what is the most important component within that strategy. It’s not if there is an illiquidity premium or not, it is do these assets provide me with the returns I need over the timescale with which I am unconcerned. If I’m thinking of buying out in five years, I don’t want an investment where the cost of going in, staying in and coming out is so great that five years is inappropriate.
PI: What trends are you expecting to see in fixed income over the next 12 months?
Halfon: Reflation in alternative asset classes. There will be fewer fixed rates than floating to potentially benefit from the spreads there.
Secondly, it is going to be difficult to extract value from structured products that have an equity tranche. That’s going to be more on the traditional levels and less on the riskier parts.
There’s a need to go even further in the governance. There are more ways to choose and there’s more sophistication and complexity. Decisions will have to be taken with the commitment and understanding of the investors, more so than in the past.
Value could be found in a number of places, but people will not blindly follow us. We have to go even further in that direction. That will create new challenges.
Cielinski: It’s too easy to spend when inflation and rates are low, so I expect we will keep electing people who carry us down that path. In the 2020 US election, I wouldn’t be surprised to see fears of a fiscal push in the years ahead that will result in pushing yields higher eventually.
Low rates are here to stay. Even if they go up it shouldn’t be dramatic. The credit cycle does not have immediate threats, but equally, valuations are now detached enough from the fundamentals that I expect little in the way of outperformance.
Wilgar: There is strong investor capitulation on the idea that interest rates are going to go up. More people are prepared to take interest rate risk for low compensation even when they are not forced to by liabilities.
In terms of research, consumer risk as opposed to corporate risk in credit is interesting, irrespective of what goes on with markets. That is an area that will continue to see more strategies entering portfolios.