Spotlight on Phil Strano, Head of Credit Research, Yarra Capital Management
Global Thought Leader Spotlight
Phil Strano, Head of Credit Research, Yarra Capital Management
In my role as the Head of Credit Research at Yarra Capital Management, I am responsible for overseeing the development and implementation of investment strategies across a range of credit asset classes.
My role includes providing insights into market conditions and supporting our investment team to ensure our portfolios are positioned to meet both client goals and broader economic trends.
I also play a critical role in balancing risk and return through multi-sector credit strategies, to help our clients navigate current market complexities.
Key themes driving risks and opportunities
The recent rethink on equities has led many investors to seek safer ground. As global uncertainty intensifies, portfolio allocations are being reassessed. Historically, fixed income has proven its value as a defensive asset, offering stability and income when equities falter.
In the current climate, these attributes are once again underscoring the resilience of fixed income. However, not all credit is created equal. With bond yields elevated, investment-grade credit presents a compelling opportunity for investors looking to mitigate risk while capturing higher income. For those comparing global fixed income portfolios, an Australian credit focus offers distinct advantages.
The Australian multi-sector credit market is substantial, valued at approximately A$1.8 trillion—comparable to the ASX 200's total market capitalisation. The investment-grade space in Australia also offers more stability and transparency than in many international markets, where the complexity of products like collateralised loan obligations (CLOs) has grown. Australia's focus remains on high-quality issuers, with a market dominated by large, financially stable entities with predictable cash flows.
Private credit, while gaining attention, remains a ‘bit player’ in a diversified credit portfolio. It offers high yields but comes with significant liquidity and valuation risks.
In multi-sector portfolios, the key opportunity lies in balancing higher-yielding private credit with more stable, investment-grade credit, capitalising on market inefficiencies across a much wider opportunity set. Shifts in global interest rates and inflation will continue to impact returns, underscoring the importance of active management.
Implications for sophisticated investors
For sophisticated investors, the current market dynamics underscore the importance of flexibility in portfolio construction. As credit spreads widen, investors need to balance offensive strategies that capture higher yields with defensive approaches, focused on credit quality and risk mitigation.
Given the shifting macroeconomic environment, portfolios should be actively managed to respond to both short-term market shocks and longer-term trends, such as regulatory changes and geopolitical risks. By emphasising diversification and incorporating both traditional and alternative assets, investors can better navigate uncertainty while positioning for growth in the coming years.
Phil will be presenting at Global Investment Institute’s upcoming Family Office Investment Forum, taking place on Wednesday, 7 May 2025 at the Grand Hyatt Melbourne, Victoria. To register your interest in attending, click here or for more information email zlatan@globalii.com.au.
Phil Strano, Head of Credit Research, Yarra Capital Management
Phil has over 30 years’ investment experience both in asset management and institutional banking. In 10 years managing portfolios and 20 years analysing financial markets/securities, Phil has amassed extensive experience in all major credit segments. These include listed/unlisted, rated/unrated, investment and sub-investment grade, bonds/loans and derivative instruments
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Disclaimer
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