Why Income Investing?
Sources of stable income are scarce and not inherent in current market conditions
Central banks’ quantitative easing measures have compressed yields and introduced an investment dilemma among investors. Innovative income solutions are key in helping investors in solving compressed yields problems.
Investors are increasingly sacrificing credit risk and taking on increased duration as well as looking into riskier asset classes in order to achieve recent returns which they used to receive in the past taking on less risk.
Besides, regulatory constraints in the High Yield space and capital ratio requirements make it difficult to find the solution that meets expectations. On the equity investment side the sky isn’t always bright either, where equity valuations can be stretched in an uncertain market with critical drawdowns.
Hence, introducing innovative solutions to income investing is key in helping investors in solving this compressed yields dilemma. We believe that investors looking to generate a regular and enhanced income with a balanced risk return profile should find the right match for their needs across asset classes with scaled risks. Thus, developing the right solutions aiming for interesting and diversified yields, some protection against large market corrections, addressing regulatory constraints as well as delivering Solvency Capital Requirement solutions is at the core of our “income generation” suite of funds.
At the heart of this investment topic, BNP Paribas Global Markets and BNP Paribas Asset Management have combined their investment and research know-how so as to provide investors with cutting edge solutions within the THEAM Quant Funds suite, to meet their expectations.
Our Solutions
Equity US Premium Income
The US Premium Income fund seeks to provide income and capital growth by implementing a defensive and systematic option strategy on an enhanced selection of US stocks, which aims at generating income in bullish and moderately bearish markets. The fund targets an income of 3% per year above USD short-term interest rate, the achievement of which, is not guaranteed.
High Yield Europe Defensive
Credit spreads are not particularly low, while absolute yield is. This leads to a difficult choice to get yield. High yield is often ruled out, despite its effective returns.
The THEAM Quant – High Yield Europe Defensive fund seeks to provide capital growth by being exposed to a long position on European high yield credit and by implementing a dynamic defensive swaption overlay strategy, which aims at mitigating risk by reducing volatility and drawdown in the Fund.
Europe Target Premium
The Europe Target Premium strategy seeks to provide income and capital growth by implementing a dynamic option strategy on Euro Stoxx 50 index, which aims at generating income in bullish and moderately bearish markets, with a risk reduction approach.
Raw Materials Income
The Raw Materials Income fund aims to generate sustained income over the medium term through the use of a quantitative, non-directional investment strategy which consists of providing synthetic exposure to the BNP Paribas DR Alpha Ex-Agriculture and Livestock Index strategy. It entails an optimal investment on the forward curve using the S&P GSCI® Dynamic Roll mono-indices and a diversified allocation among 9 commodities.
Key points
- Access to the Commodity Curve Alpha source that was implemented in our flagship in-house commodity strategy, BNP Paribas® Oscillator Commodity strategy (live since October 2007).
- Commodity Curve Alpha: created through an optimal investment on the forward curve using the S&P GSCI® Dynamic Roll mono-indices.
- Diversified allocation among 9 Commodities within an ex-agriculture and livestock broad commodity universe.
For more details, please check the product page which is accessible through the table at the bottom of this page.
Equity Income Defensive
BNP Paribas has developed an investment strategy which uses a rule-based method to select highly liquid non-financial companies. These are selected based on an analysis of their ability to pay high, recurring and sustainable dividends.
The objective of the THEAM Quant – Equity Income Defensive fund is to provide income and capital growth by being exposed to a portfolio of quality-dividend, ESG-compliant equities and by implementing a systematic options strategy which aims at generating additional income and reducing risk by minimising volatility. The strategy is available in a Eurozone version.
