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How global corporate bonds can improve outcomes for UK investors
Peter Becker
Investment Director
Flavio Carpenzano
Investment Director
October 2, 2023
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Investment-grade corporate bonds play a central role in a well-diversified fixed income portfolio, with the potential to generate attractive risk-adjusted returns. Many investors continue to maintain a preference for their domestic market when considering investment options.


However, investment strategies focused solely on one’s own domestic market may not be able to spread risk effectively. The potential diversification benefits of adding more markets and issuers to a portfolio are intuitive to most, highlighting the advantages of a global portfolio over regional strategies. This is illustrated in the efficient frontier analysis chart below. As can be seen, diversifying UK gilts exposure using global corporates rather than UK corporates not only increases potential expected returns, but also reduces volatility. This is due to the diversified nature of the global corporate market.


Efficient frontier analysis

Comparing hypothetical fixed income portfolios

Efficient frontier analysis

Past results are not a guarantee of future results
Selected assets include Sterling Aggregate – Corporates, UK Gilts, Global Aggregate – Corporates (GBP-hedged).
Monthly returns from January 2001 to 31 August 2023. Source: Bloomberg

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Peter Becker is an investment director at Capital Group. He has 27 years of industry experience and has been with Capital Group for five years. Prior to joining Capital, Peter was a managing director in the fixed income product management team at Wellington Management. Before that, he was a portfolio manager at Aberdeen Asset Management. He holds a master's degree from The Ingolstadt School of Management. He also holds the Chartered Financial Analyst® designation. Peter is based in London.

Flavio Carpenzano is an investment director at Capital Group. He has 18 years of industry experience and has been with Capital Group for two years. He holds a master's degree in finance and economics from Università Bocconi. Flavio is based in London. 

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