Published: 04/09/2023
Category: Member Benefits
Published: 04/09/2023
Category: Member Benefits


Global capital markets have seen strong performance in 2023 despite the backdrop of economic challenges.

What are the investment opportunities going forward? Why is fixed income corporate credit offering particularly attractive opportunities right now? I discussed these issues with a group of fixed income experts within Franklin Templeton. Here are my key takeaways from the discussion:

Move out of cash and into fixed income.

While interest rates on cash are high, fixed income instruments provide similar yields with the added benefit of higher future total returns if interest rates decline. Given the current dynamics, the panel thought this was a good time to lock in current interest rates.

Corporate bonds show solid fundamentals.

Current leverage, interest coverage, free cash flow and amortisation schedules are at stronger levels than in the recent past. Focusing on higher-quality instruments allow portfolios to capitalise on generous current yields, income that could help weather economic storms should the economy weaken further than we expect.

Companies re-financed at low rates during the pandemic, avoiding the need to refinance at today’s higher rates.

This may have contributed to the lower impact of the Federal Reserve’s rate hikes as companies do not need to refinance. Many companies may need to refinance by 2025, and thereafter, but we expect rates to decline before then.

High-yield bonds offer attractive total returns and better credit profiles than in the past.

High-yield bonds may offer a bridge for investors between the typical risk/return profiles of fixed income and equity, with yields near 8.5% and some capital appreciation potential.(1) In terms of improved quality, the proportion of issuers that are public companies has grown. This is important because they tend to manage their balance sheets more conservatively. In addition, the amount of secured high-yield debt has also risen.(2)

Private credit offers higher yields and lower correlations.

Private credit providing a level of certainty and flexibility that banks can no longer offer has fuelled corporate growth. A highly diversified pool of mostly senior secured loans generates strong risk-adjusted returns, with higher interest rates, lower leverage and tighter terms. Yields in private credit range from 11.5% to 12.5%,3 but investors must be able to bear illiquidity.

According to the panelists, interesting industries for opportunities include non-bank financials and select cyclical credit, including chemicals and homebuilders.

Sectors to avoid include wireline telecom and mall-based retailers.

In conclusion, fixed income currently looks more attractive based on higher overall yields. Well-chosen, quality fixed income can add value beyond yield generation, benefiting from capital appreciation if there are future rate cuts.

This panel discussion was moderated by Stephen Dover, Chief Market Strategist and Head of Franklin Templeton Institute, and included Michael Buchanan, Deputy Chief Investment Officer and Head of Credit, Western Asset Management; Glenn Voyles, Director of Portfolio Management – Corporate Bonds, Franklin Templeton Fixed Income; Bill Zox, Portfolio Manager for High Yield and Corporate Credit Strategies, Brandywine Global; and Larry Zimmerman, Managing Director and Head of Private Debt Origination, Benefit Street Partners.

Partnervest – supporting unions by supporting their members investments.

Partnervest is a specialist provider of investment solutions for Unions, Entitlement Funds, Charities and through your financial advisor at Industry Super Funds.

In particular we offer five multi-asset funds:

  • Franklin Multi-Asset Defensive Fund
  • Franklin Multi-Asset Conservative Fund
  • Franklin Multi-Asset Balanced Fund
  • Franklin Multi-Asset Growth Fund
  • Franklin Multi-Asset High Growth Fund

These funds are adjusted to consider the relative attractiveness of each asset class given the prevailing economic conditions, whilst maintaining risk and return parameters.

To learn more about how Partnervest can help you build your financial future, contact Serg Premier on 1300 734 496 or email [email protected].

Authors: Stephen Dover, CFA Chief Investment Strategist Head of Franklin Templeton Institute – Partnervest is a division of Franklin Templeton Australia Limited (ABN 76 004 835 849, AFSL 240827)

(1) Source: Bloomberg, as of August 4, 2023.
(2) Source: Bloomberg, “Borrowers Flock to High Yield Bonds, Ditching Leveraged Loans,” August 3, 2023.
(3) Source: Bloomberg, “Private Debt Unitranche Loan Index, Yield to Expected 3-Year Takeout,” July 24, 2023.


All investments carry risk. Before deciding to invest, you should consider the following key risks:
• The value of investments will vary. You can lose money as well as make money.
• The level of returns will vary, and future returns will differ from past returns
• Returns are not guaranteed and investors may lose some or all of their money, and
• Laws change.

Past performance is not an indicator of future returns. Issued by Partnervest, a division of Franklin Templeton Australia Limited (ABN 76 004 835 849, AFSL 240827).

Before making an investment decision you should read the relevant Product Disclosure Statement (PDS) carefully and you need to consider, with or without the assistance of a financial advisor, whether such an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. The PDS is available and can be obtained by contacting Partnervest on 1800 679 541 or at In accordance with the Design and Distribution Obligations and Product Interventions Powers requirements, we maintain Target Market Determinations (TMD) for each of our Funds. All documents can be found via or by calling 1800 673 776. 

The information in this presentation is of a general nature only and is not intended to be, and is not, a complete or definitive statement of the matters described in it. The information does not constitute specific investment advice and does not include recommendations on any particular securities. Franklin Templeton Australia Limited nor any of its related parties, guarantee the repayment of capital or performance of any of the Franklin Templeton trusts referred to in this document. Although statements of fact in this presentation have been obtained from and are based upon sources Franklin Templeton Australia Limited believe to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions and estimates included in this communication constitute our judgement as of the date of this communication and are subject to change without notice.

Don’t miss the return opportunity in fixed income

Don’t miss the return opportunity in fixed income