Introduction to Aegon Asset Management at the Channel Islands Event

The financial landscape of the Channel Islands recently hosted a significant event where Aegon Asset Management took center stage to address key investor questions. Alexander Pelteshki, Portfolio Manager for Aegon's Strategic Bond Strategy, provided valuable insights into the fund's objectives, opportunities, and risks in the current market environment. This session not only offered a deep dive into Aegon's approach but also shed light on broader trends in fixed income investing, highlighting the importance of active management in achieving superior returns.

Overview of the Aegon Strategic Bond Strategy

Aegon Asset Management's Strategic Bond Strategy is designed to serve as a foundational allocation to fixed income within investors' portfolios. The strategy focuses on traditional publicly listed securities, including government bonds, investment-grade and high-yield corporate credits, as well as emerging market corporate credits. By sticking to these asset classes, the fund aims to deliver returns that outperform readily available alternatives, such as ETF bond proxies and similar actively managed funds[5].

Key Objectives:

• Superior Returns: To achieve returns better than what investors could obtain from other readily available fixed income investments.
• Zero Correlation to Equities: Ideally, the fund seeks to provide returns with minimal correlation to equity markets, allowing investors to manage cross-asset risk effectively.

Opportunities and Risks in Fixed Income Markets

Opportunities:

In 2025, Aegon sees significant opportunities in the fixed income markets. Investment-grade indices are yielding close to 5%, while high-yield indices are nearing 8%, making them historically attractive. This environment creates a favorable backdrop for active bond fund managers who can capitalize on market inefficiencies.

Risks:

Despite the opportunities, risks are pronounced due to tight credit spreads, which have not been this low for a long time. This environment poses challenges for passive or indexed investing in bonds, as the tight spreads indicate overvaluation in parts of the market[5].

Current Investment Strategies

Aegon Asset Management is focusing on investments with self-help improvement trajectories and those offering sufficient spread compensation to mitigate risks. One notable investment in the portfolio is Metro Bank's debt:

• Metro Bank: The bank has faced challenges but is proactively addressing them. Aegon sees potential for credit improvement over time, and the current spreads offer a cushion against unexpected delays in Metro Bank's business plan execution[5].

Importance of Active Management

The current market environment underscores the importance of active management in fixed income. With tight credit spreads and historically high yields, the potential for active fund managers to outperform the market is enhanced. Aegon's approach highlights the benefits of a strategic and active investment philosophy:

• Engagement and Expertise: Active managers can engage deeply with issuers and leverage market expertise to identify undervalued opportunities.
• Risk Mitigation: By focusing on credit fundamentals and spread analysis, active managers can mitigate risks associated with low credit spreads.

Insights for Investors

For investors considering fixed income allocations, Aegon's insights offer several key takeaways:

Key Takeaways for Investors:

• Diversification: Incorporate a mix of fixed income securities to manage risk and capture different sources of return.
• Active vs. Passive: Consider active management to capitalize on market inefficiencies and avoid the pitfalls of overly tight credit spreads.
• Economic Conditions: Monitor economic conditions closely, as they can significantly impact fixed income market dynamics.

Conclusion

Aegon Asset Management's presence at the Channel Islands event provided valuable insights into the strategic considerations behind their fixed income offerings. As investors navigate the complexities of today's financial markets, understanding these strategies can help inform their investment decisions and optimize their portfolios for the challenges and opportunities ahead.