iBoxx Clever: How to re-enter the ring with corporate bonds

Outlining a practical framework to help you prepare for future opportunities to buy corporate bonds at more attractive prices.

Corporate Bonds should be an attractive asset class for pension schemes – but right now, they offer poor value. That said, market conditions can shift quickly. Our report outlines a practical framework to help you prepare for future opportunities to buy corporate bonds at more attractive prices.

The framework has three components:

• Establish triggers – Buying opportunities are episodic so you need to plan in advance and move quickly.
• Consider relative value – High-quality, shorter-dated ABS should be more stable when sold, allowing you to lock into corporate bonds which offer more ‘bang for buck’ due to their duration.
• Focus on implementation – Line up your corporate bond mandate and ensure your LDI manager can account for the interest rate duration to maintain the hedge.

The key takeaway is that planning is crucial – we therefore suggest discussing this topic at your next Trustee meeting to set out a framework suitable for your Scheme’s circumstances.