July Survey Results!


The July European High Yield Survey had 74 respondents – Family Offices, Hedge Funds, Asset Managers and Sell Side all participated with broad representation from across Europe as well as from the US.

As with the June Survey we spit the respondents into 2 groups – “Risk Takers” PMs and CIOs and “All” – all respondents we do this to differentiate between those with authority on fund positioning and those with input on fund positioning.

Overall responses were slightly more bearish from a valuation perspective with 34% of risk takers viewing European High Yield as Expensive vs 22% in June. We introduced some new questions in this month’s survey,


New Questions

The first new question was “In the last month my Risk appetite has” – overwhelmingly – 64% – of risk takers reported a decline in risk appetite over the month. We also asked “Over the next 1,3,6 and 12 month spreads will..”, The shape/ path of spreads appears to point to near term stability with widening over the next 3 to 6 months with a net bias for tightening over the 12 Month horizon. Given the up and coming unwinding of national furlough schemes, rising corona virus infections, the US election and Brexit this all seems reasonable.

A third new Question asked when European default rates are expected to peak – generally the profile matches spread expectations. Standard and Poors reported that Europe had surpassed the 2008 in terms of year to date defaults with 20 YTD giving a sense of scale. Finally we asked about expectations for liquidity over the next 6 months – this very much fell along the lines of ratings – however there was a definite difference between the view of risk takers and the all group with a much more bearish view taken by non risk takers.

Positioning – despite the asset class being perceived as more expensive, the 6 month view is overweight, along with expectations of above average inflows points to the technical of a persistent “reach for yield” supported by central banks.

In terms of event risk Corona remains the top concern followed by defaults and economic growth. Interestingly return expectations declined somewhat with more respondents 34% risk takers vs c30% in June expecting European high Yield to deliver 0 to -5% for 2020. Sector and ratings wise there is a current positioning bias for the safety , but there are definite signs of contrarian bets in some of the more exposed / cyclical sectors.


All in All

All in all concerns look to be 3-6 months away with expectations of normalization over a 12 month horizon, positioning appears defensive and we are some way from when defaults are expected to peak. Valuations look rich and likely get richer, return estimates are slightly more subdued – fund flow expectations and positioning still point to expectations the asset class are supportive.



Going forwards – we plan on running the survey Quarterly – we appreciate the time people have taken to complete the survey and want to ensure it has maximum utility.

As we are just starting out we are calibrating the process and if we had to choose between short and more frequent vs. longer and less frequent we think the later will be of most benefit to everyone.

Below are the questions and charts – download the presentation here

Respondent Mix


European High Yield’s Current Valuation is:

How are You Currently Positioned by Rating:


How are You Currently Positioned by Sector?

Your Overall Risk Positioning for the Next 6 Months Would Be



In the Last Month My Risk Appetite Has:



The Biggest Risk to Portfolio Returns Ranked MOST Important to LEAST Important are:


What Will European High Yield Return as an Asset Class in 2020?


For 2020 You Expect European Default Rates to be:

Default Rates Will Peak…

Year End  2020 High Yield Spreads Will Be:

Spread Expectations:

Recoveries in 2020:

What Are Your Expectations for Investor Fund Flows for the remainder of 2020?

Liquidity Expectations:


Best Hedge:


The Best Hedge For European High Yield in the Next 6 Months is.


This Month’s New Issues…





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