Speaking at a lunch in Sydney, Aberdeen senior investment manager John Manning said cheap access to capital has seen a number of complex, high risk bonds brought to the market by “creative investment bankers”.
Mr Manning said many of the hybrids such as ‘pay-in-kind toggle notes’ that were around in late 2006 and early 2007 have returned under “fancy new names”.
“All the deals that you used to see in the noughties, all those fruitier structures, they’re all back,” said Mr Manning.
Retail investors, he said, are particularly vulnerable since they have “no idea what risk they’re taking on board”.
“The key challenge for the investment community today is to make sure you’re getting paid for the risk that you’re assuming,” he said.
Mr Manning said investment managers need to be “disciplined in their investment philosophy” and respect their client’s money when putting it to work.
While it’s easy to chase yield in the current market, he said, investors need to be looking at the long-term performance of assets.
“The focus [should be] on understanding the risk, being comfortable with the risk, before you start looking at the price of something,” he said.
