Spotlight on Roy Keenan, Co-Head of Australian Fixed Income, Yarra Capital Management
Global Thought Leader Spotlight
Roy Keenan, Co-Head of Australian Fixed Income, Yarra Capital Management
In my role as Co-Head of Fixed Income at Yarra Capital Management, I oversee the fixed income business in Australia. I co-manage a team of 13 specialists with deep market expertise and a strong track record of outperformance.
Founded in 2017, Yarra Capital Management is a leading independent Australian fund manager with over A$21.6 billion in AUM. We offer a select range of actively managed Australian and global equity, fixed income, and multi-asset capabilities.
Managing risk in ‘higher for longer’ environment
For investors, the key challenge today is securing reliable, consistent income while managing risk in a prolonged higher-interest-rate environment. This is where investment-grade credit can add significant value to a portfolio.
Investment-grade credit provides high-quality income with a low likelihood of default. It is particularly well-suited for a 'higher for longer' interest rate scenario, as the underlying companies tend to maintain manageable debt levels, exhibit greater flexibility in managing costs, and possess stronger pricing power for their products.
Ultimately, it comes down to balancing risk versus reward. Currently, high-yield credit does not offer sufficient returns over investment-grade to justify the additional risk.
Volatility and liquidity considerations
Volatility and liquidity are critical factors for investors. To mitigate volatility, a strategy that combines fixed and floating rates can effectively reduce event and interest rate duration risks, minimise negative annual returns, and enhance overall income and returns.
In some funds, securities are highly visible with daily liquidity. On the other hand, certain fixed-income assets, such as private credit, may be less liquid but exhibit reduced volatility since they are not marked-to-market like publicly traded securities. However, it is important to recognise that while private credit may appear less volatile due to less frequent pricing, the underlying risks can still persist, particularly during periods of financial stress.
Balancing risk and income
Assessing the balance between risk and income is crucial. Be cautious of opportunities that seem too good to be true, especially those offering unusually high yields in fixed-income investments. If you're presented with an offer of a 14% yield, question the rationale behind it—there is always a reason, and it often involves heightened risk.
Investors must navigate the coming period by focusing on stable segments of the market while managing risks effectively. Look for funds that offer the flexibility to navigate duration, credit, and liquidity challenges.
Roy will be presenting at Global Investment Institute’s upcoming Family Office Investment Forum - Melbourne, taking place on Thursday, 17 October 2024 in Melbourne CBD, Victoria.
To register your interest in attending, click here or for more information email zelda@globalii.com.au.
Roy Keenan, Co-Head of Australian Fixed Income, Yarra Capital Management
Roy is an industry veteran with over 30 years of investment experience in asset management and trading, specialising in Australian fixed income and credit products since 1993.
Roy has extensive knowledge of the domestic credit and hybrids market. His expertise is integral to security selection, capital allocation, and setting risk tolerance, particularly in assessing hybrid structures and identifying relative-value opportunities. Before his tenure at Yarra, Roy was a long-standing member of Goldman Sachs Asset Management's Fixed Income team. His extensive experience and insight make him a pivotal figure in the investment community.
Roy holds a Bachelor of Business (Accounting) from Swinburne University, Melbourne.
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