Insights

With tapering worries in the rearview, attention has returned to the inflationary environment.

Highlights from the week of November 12 – November 18, 2021.

Harnessing alpha and diversification potential through efficient portfolio construction

The breadth and depth of Environmental, Social, and Governance data that investors currently have at their disposal is “a good problem to have”, as it highlights the normative sea-change over the past decade towards a now crucial commitment that companies must make to ESG transparency. Machine learning can help in discerning – and when necessary, creating - signal from noise.

Voya’s Large Cap Value team believes that excess capital yield (ECY) provides a holistic view of the amount of capital a company has available to create value. We apply our ECY framework to evaluate stocks from a relative value perspective and construct a diversified portfolio with a higher yield than the benchmark.

Driven by continued strong investor demand, the US CLO market remained very active in Q3.

While growth in the U.S and globally is expected to cool from its torrid pace in 1H21, fundamentals remain broadly positive and opportunities could arise in any meaningful bout of spread volatility.

Though the inflation debate continues, we concur with the Federal Reserve that price increases will be manageable. We believe the Fed can conduct monetary operations along its well communicated path, paving the way for reaccelerating, above-trend 4Q21 real GDP growth.

While growth in the U.S and globally is expected to cool from its torrid pace in 1H21, fundamentals remain broadly positive and opportunities could arise in any meaningful bout of spread volatility.

The next decade is unlikely to play out like the last. A new environment calls for a new approach to fixed income portfolio construction.