"No one ever worries about the bus they see coming"

As we all know by now, monetary policy has been tight around the world for some time. While central banks have begun to cut rates, there remains the possibility that things will break. 

That's why, for example, US markets are so delicately poised. Whilst the expectation is for a soft landing, investors know that's a tight needle to thread and that a full-blown recession could still be on the cards. 

This sentiment is shared by Janus Henderson's Head of Australian Fixed Interest, Jay Sivapalan, who says; 

"We're looking at whether there are any vulnerabilities and what could break. 

So no one ever worries about the bus that they see coming, but what are the things that markets are not focusing on that we should be thinking about?"

In the following Rapid Fire, Sivapalan shares what he sees as the key risks and opportunities, and explains why the hunt is so important to his process. The full-length Views From the Top interview with Sivapalan will follow in the coming days. 

Note: This interview was filmed on Tuesday 28 August 2024.

Edited Transcript

Chris Conway: Jay, thanks for agreeing to do a Rapid Fire with Livewire. What's the biggest issue being debated in the Janus Henderson fixed interest war room right now?

Jay Sivapalan: Well, policy has been tight around the world for a little while now, so we're looking at whether there are any vulnerabilities and what could break. So no one ever worries about the bus that they see coming, but certainly, what are the things that maybe the markets are not focusing on that we should be thinking about?

CC: What are the core principles of your investment philosophy?

JS: We always undertake our own proprietary research, and once we've done that research, we want to make sure that we are backing that research. And if that means going against or contrary to the broader market, that's definitely part of what we do. And then the last one is just to keep it simple.

CC: What are you most excited about for the next 12 months?

JS: Fixed interest as an asset class is relevant. Again, we have yields and we have returns and actually outcomes that our clients and investors can live off and eat off.

CC: What is the biggest risk you think investors are ignoring?

JS: It's really the default cycle and the loss given default. So a lot of investors and markets focus on the sticker yield, but perhaps what they actually get in a year's time or two years' time is materially less than the sticker yield.

CC: Jay, this is my favourite question I ask everyone. As a seasoned investor, what gives you more satisfaction? Is it the hunt for the opportunity or is it the reward when you get it right?

JS: It's always the hunt. In many ways, rewards are looking and it's very pleasing if you've got good outcomes for clients. But at the end of the day, our job is to continue to look for that next opportunity, that next dislocation in markets, and that's what really drives outcomes for clients.

CC: Thanks for sitting down with Livewire.

JS: Pleasure, Chris.

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Janus Henderson Australian Fixed Interest Fund

Australian Fixed Income

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