The Big Question

The big question that clients in Asia Pacific are asking me is, “Are conditions right for high yield bonds?”

Hi, I'm Mitch Garfin, Co-Head of Leveraged Finance, overseeing our U.S. and global high yield strategies.

One of the biggest reasons why I believe that conditions are right for investing in high yield is the evolution of the high yield market. We have seen a significant upgrading in credit quality within the high yield universe over the last 10 or 15 years¹.

We've seen lower-quality credit finance themselves in the leveraged loan market and in the private credit markets as opposed to high yield, thus leaving a much richer, higher-quality opportunity set within high yield.

Given some of the potential volatility out there, we believe that an active approach is well-suited for high yield investing. The way potential macroeconomic conditions are going to impact certain sectors or certain issuers is going to be uneven and we believe actively managed portfolios within high yield is ideally suited for the asset class.

Finally, with rising uncertainty, high yield can be relatively attractive to both investment grade as well as equities.

In particular, high yield offers significant income pick up relative to investment grade bonds². Versus the equity markets, price volatility within high yield is lower as compared to the potential volatility that exists in equity markets^3.

Sources:

¹ BlackRock, Bloomberg data, as of February 2025

² Bloomberg, as of 31 January 2025. US High Yield represented by Bloomberg US Corporate High Yield 2% Issuer Capped Index. US Investment Grade represented by Bloomberg US Corporate Investment Grade Index.

³ BlackRock data, as of March 2025

The big question that clients are asking me today is, “How do multi-asset strategies weather market volatility?”

Hi, I'm Justin Christofel, portfolio manager and Co-Head of the Multi-Asset Income team here at BlackRock. 

2025 has started out in a much more volatile and uncertain fashion and now we're seeing investors look more toward diversifying multi-asset strategies to help them navigate these uncertain times.

A multi-asset approach has the dual benefit of being able to invest across a broad global opportunity set, while also being able to dynamically adjust its asset allocation as the opportunity set and risk landscape evolves.

So putting this in today's context, U.S. assets have struggled amidst this market turmoil. With growth likely to be weaker and inflation higher than the consensus expected at the start of the year, we think investors need to reconsider their asset allocation.

This includes emphasizing quality dividend payers, shifting more exposure into non-U.S. equities, staying cautious on long-term interest rates, and leaning into select credit exposures where yields are relatively more attractive.

Ultimately, this market environment can leave investors feeling paralyzed. However, we think a diversified opportunity set and willingness to adapt provide multi-asset investors the right toolkit to navigate today's market.

Moreover, having a portfolio that derives a greater portion of the total return from income may insulate investors from the harshest price swings that may be a feature of the investment landscape this year.

The big question that clients in Asia Pacific are asking me today is, “Can financials sustain their positive momentum?”

I'm Vasco Moreno, a portfolio manager within BlackRock's Fundamental Active Equity team.

I think financials can sustain their momentum. On the one hand, the economic activity as well as interest rates across the world are in the sweet spot for bank profitability ¹. We also have increased investment, which is going to drive loan growth as well as capital markets activity.

We have costs potentially going down, on the back of the deployment of AI in the industry. 

Regulation is in the process of being rolled back with very positive implications for both consumer credit companies as well as banks.

And lastly, we have strong capital returns in the form of both dividends ² as well as buybacks, which should continue to increase.

This year there are two major structural tailwinds in the industry.

In the US, we have a much better regulatory backdrop.

In Europe, we should have a significant increase in investment, both in infrastructure and military, which should drive economic growth with positive implications for both loan growth as well as interest rates.

Sources: 

¹BlackRock, as of January 2025

²BlackRock, Bloomberg data, as of March 2025

The big question that we’ve been getting from clients is, “Why has gold gone up so much and should they invest in it?”

Hi, I’m Elaine Wu, Head of APAC Investment and Portfolio Solutions at BlackRock.

The reason for the demand for gold is partly driven by flight to safety. Risk of geopolitical tension results in uncertainty in the equity market.

And when that happens, gold is actually a very good commodity to hedge your portfolio.

Another tool that clients can consider is investing into active ETFs that rotate between styles in times of market change or uncertainties.

So for instance, a portfolio manager can decide to shift the focus away from growth driven companies into more defensive companies that provide dividend yield in times of market volatility.

The big question that clients are asking me today is, “Why now for Asian bonds?”

Hi, I’m Yii Hui, portfolio manager on the Asian Fixed Income and Credit team at BlackRock.

Amid the global market volatility triggered by escalating trade tensions, the golden age of fixed income shines bright, especially in Asian credit.

The asset class has evolved into a higher quality, diverse investment universe, no longer dominated by one country or sector. We believe this transformation offers investors opportunity for both growth and resilience.

Since President Trump announced his presidential bid in 2022¹, Asian credit has outperformed US credit by over 4%², supported by higher growth, lower inflation, and stronger fundamentals. With more room for rate cuts and limited supply of US dollar credit, Asian credit also benefits from a supportive technical backdrop.

More importantly, tariffs have low direct impact on companies within the Asian credit universe³, as the market is largely made up of infrastructure players, government-backed corporations, and companies focused on domestic demand. 

Elevated yields in Asian credit present a timely and compelling opportunity for investors. By capturing undervalued, higher-yielding, and shorter duration bonds, investors may benefit from relatively attractive yields without taking excessive risk.

Notes:

¹ Between 15 November 2022 and 10 Apr 2025

Sources: 

² BlackRock, Bloomberg, as of 10 April 2025. Asian Credit refers to the JP Morgan Asian Credit Index. US credit refers to BBG Global Agg Corporate TR Index Hedged USD.

³ BlackRock, as of 31 March 2025

The big question that clients in Asia are asking me today is, “How can I take advantage of global investment opportunities in the current economic and geopolitical environment?”

Hi, I'm Rick Rieder, Chief Investment Officer of Global Fixed Income and Head of Global Allocation at BlackRock.

So I think we're in the golden age of fixed income, and I have been doing this for multiple decades and now, what is extraordinary is the yield that's available around the world. You don't have to stretch, you don't have to take inordinate risk, you don't have to worry about things like negative interest rates. Now, you’ve got generous interest rates, you’ve got generous real rates and you don't have to go out the yield curve.

We're living in a world that we haven't seen in a couple of decades, where real rates are extremely high. So we've gone through this period after Covid, where all of a sudden, the rate of inflation has come down¹ and now there's income opportunity everywhere.

Income around the world is something we haven't seen in fixed income for a long time, and taking advantage of that – different asset classes, different regions – your ability to diversify and generate return is significant.

¹BlackRock, Bloomberg, data as of November 29, 2024. There is no guarantee that any forecasts made will come to pass

The big question our clients in Asia-Pacific are asking is, how should I react to volatile markets?

Hi, I'm Alister Hibbert, Chief Investment Officer of the Strategic Equity team here at BlackRock. 

And this question is one of the most fundamental of all for public market investors. Public markets are fabulous because they allow us to change our mind and shift portfolios at short notice. But just because we can doesn't always mean we should. In fact, it is the behavioral mistakes made by investors themselves that often lead to short term decision making and poor returns. 

At the heart of all things, we need to remember that anything cyclical is always self-healing. After a bear market is a bull market. After a company misses its numbers because revenues come in lower than budget, the management team adapts the cost base and earnings to recover. But in all this volatility, investors often lose their way, turning temporary cyclical losses into permanent losses by selling at the wrong time. 

In short, there is a lot to be said for inaction in volatile markets. That means ignoring the deafening day-to-day noise of markets, remembering that it pays to be optimistic over time, and focusing only on the best companies. These are the companies which can sustain their high returns for the next ten years or more, and compound their earnings ahead of the market over the long term. 

So invest in the best (better) companies and stay invested. 

The big question clients are asking now is, “Is Asia Credit making a comeback?”

Hi, I'm Stephen Gough, portfolio manager and Head of Asia Credit at BlackRock.

The Asian Credit market investors knew three years ago is vastly different to what we see today.

It is now more diverse and no longer dominated by one country or sector. This shift opens up opportunities for alpha generation through deliberate bottom-up security selection.

With supportive economic growth, muted inflation, companies increasingly exhibiting quality tilts, and attractive valuations, the market has outperformed global peers over the past year.

It might surprise investors to hear that Asian Credit is a huge hotspot for alpha, and the way we generate alpha is by selecting the right securities. Being able to tell the difference between a good opportunity and a great opportunity is everything.

To do this, the key ingredient is research. That is why BlackRock has built one of the largest credit teams in Asia, with exceptional access to and deep relationships with our issuers.

We get under the hood to really understand a company, the capital solutions they require and through that deliver success for our clients. This is how we stay ahead of the curve, discerning valuable signals from the noise.

The time for Asian Credit is now.

The big question we have been hearing from clients is, ‘How can AI help us to invest?’ 

Hi, I’m Rui Zhao, a portfolio manager within BlackRock’s Systematic Active Equity team.

With so many stocks in the global market, it is extremely difficult for human investors to analyse all the information available from a multitude of sources on their own, and then extract useful insights of all the companies such as the company’s products, profitability, and growth prospects. That is where the benefit of AI comes in, and why we have been using it across our systematic investment platform.

We began using AI back in 2008 - building infrastructures that can accumulate all the big data, and train machines to analyse the data. We assess a universe of five thousand securities every day, constantly advancing our machine learning technique and evolving the signals that we use to generate alpha more effectively.

These signals can help us identify trending products among consumers, such as products recommended by online influencers, and assess investor sentiment from social media posts across different platforms and languages. We can also spot early red flags in company documents exchanged with regulators, which may indicate a potential negative impact on shareholder value.

So by using AI in our investment process, we can strive to better forecast returns and generate consistent income for our clients.

The biggest question clients are asking me today is how do I make my money work harder for me?

Hi, I'm Navin Saigal, Head of Asia Macro for Fundamental Fixed Income at BlackRock.

Well, cash in the system is at record highs. Money market funds, bank deposits, corporate balance sheets, you name it. And that's not surprising given that interest rates are also at multi-decade highs.

For most of the last two decades, when interest rates were much lower, you had to lend money for 10 to 30 years to companies that may not even be around to pay you back just to deliver any meaningful income.

But today, with yields significantly higher than before, you can lend money for shorter time horizons to much safer borrowers, say, to governments for 3 to 5 years and still get a meaningful income out of that.

Today, many building blocks that were not available in the past have become available again in portfolio construction. From Asian government bonds to European corporate bonds, these are all tools that could make up that global diversified portfolio, with a generous income stream.

With central banks on the verge of an easing cycle, this opportunity may not be there forever. So it's time to put your money to work now.

So the big question our clients in Asia are asking is the tremendous run that we have seen in the technology sector – if it's over, if it's hype, and will it continue?

Hi I'm Tony Kim. I'm the lead portfolio manager of the technology strategy for BlackRock.

My answer to this question is we're just getting going. And this is going to be the predominant theme for the rest of this decade. We are just in the early stages of the build out in the development, for AI and how that translates to the technology sector.

We look at AI from a full stack perspective, where we, decompose all the elements of AI, everything from energy to compute to software to models to data and to applications. We then look at all of those categories and subcategories, and we are investing along this whole stack.

We believe that this is going to continue throughout this decade. And so, in no means is it over. In fact, it's just beginning.

The big question that our clients in Asia Pacific are asking us today is how do I prepare my portfolio in a robust and resilient manner so that the portfolio is ready to maneuver and navigate today's fast changing markets?

Hi, I'm Daniel Caderas . I'm a multi-asset investor, and I lead the Global Tactical Asset Allocation team here at BlackRock.

What worked in the past potentially, where you just combine stocks and bonds in a portfolio and they're largely offset by each other, in particular, during periods of stress and volatility. Those times are gone.

We believe as an investor these days you want to be flexible, you want to be nimble. You also want to incorporate the fact that the world is changing fast, and you want to have a more short-term view.

We are a team which invests in a more tactical manner, which means we focus on the short-term to mid-term time horizon. We do this across a large opportunity set, and that allows us to be flexible in terms of going anywhere. So wherever we believe there's dislocations, discrepancies, wherever the market tends to overreact or underreact, that's where we can position ourselves.