Dutch institutional investors, including insurers, have increasingly turned their attention to riskier high-yield (HY) bonds over their investment-grade counterparts over the past two years, with most of the former made abroad.

As reported by our sister title, Insurance Asset Management, these HY bonds include corporate bonds as well as government bonds issued by emerging market economies.

For corporate bonds, the vast majority of investments are made in US firms. In February 2022, Dutch institutions had €27.4bn outstanding in these HY bonds, representing more than 30 per cent of their bond holdings at that time. US firms dominate the global HY corporate bond market, with notable issuers such as Ford, Kraft Heinz and Occidental Petroleum.

For government bonds, the HY government bonds of the BRICS countries Brazil and South Africa have attracted heavy investment. Whereas allocated assets stood at €7.2bn in early 2020, they had grown by more than 70 per cent to €12.3bn by February 2022.

The government bonds of the BRICS countries India and China are considered IG, as were those of Russia, the last other BRICS country, until late February 2022. However, most credit rating agencies have since refused to issue credit ratings for Russia due to the uncertainties associated with the war in Ukraine and the sanctions imposed on Russia.

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