A new center of expertise for bond markets

A new center of expertise dedicated to bond markets, called BONDS, has been up and running since 2011, to serve Societe Generale Private Banking clients. It responds to the increasing demand for this type of investment.

Until the end of the Nineties, debt markets (or bond markets) were less developed than equity markets. One of the main reasons for this was a deficit of bond culture among investors: debt markets were wrongly thought to be risk-free and under-performing, and were neglected. Only sovereign debt markets really existed.

Now among Societe Generale Private Banking’s first asset classes

Things have changed. Equity investors’ appetite for very high returns led to increasing indebtedness of economic agents and, since the end of the Nineties, to the development of corporate bond markets (“credit”). This was encouraged by tighter banking regulations, which led banks to be more restrictive in extending credit to companies. Companies therefore tapped bond markets more and more. Recently, and in light of the remarkable performance of debt assets in 2009, the private banking industry has opened up to them. Credit has since become one of the most important asset classes for Societe Generale Private Banking in terms of outstandings, whatever the type of management service.

Particularly interesting and long-lasting characteristics

Historically, credit bonds have demonstrated remarkable performances. But performance is not the sole advantage. As emphasised by Ollivier Courcier, head of the new BONDS expertise centre, “The existence of a predetermined maturity, of a fixed coupon in most cases, and of a reduced volatility are comforting elements for investors, all the more so in an environment as uncertain as ours.” Credit bonds have other particularly interesting characteristics. These loans indeed offer the advantage of a constantly improving liquidity  (and strong for sovereign bonds).

Finally, credit bonds currently offer a better return than sovereign bonds. “Companies are in far better financial health than private persons or public borrowers", says Ollivier Courcier. BONDS is here to help take advantage of this.

Interview with Ollivier Courcier, head of the new BONDS expertise centre

Ollivier Courcier, who enjoys past experience as credit analyst and credit  funds' manager at institutional asset management companies, set up the new expertise centre in 2011. The director of BONDS talks about this simple and innovative model.

What does BONDS bring to Societe Generale Private Banking clients?

Ollivier Courcier: The bond universe is very rewarding. Investors will find a great diversity of products in terms of yield, geographical market and investment horizon; and also a risk level adapted to their particular requirements. This market depth makes it possible to act in a very personalised way according to the expectations of each client. It's a great advantage – but it requires a robust investment process and professional portfolio management advice, which is what we provide for our clients.

Can you expand a bit?

O. C.: The strength of BONDS lies in the simplicity of our model and in our performance levers. The expertise centre is based on two pillars: a rigorous, global selection of borrowers, conducted by an outside team of analysts, combined with an on-going analysis of financial markets by our strategists. AMBA, our exclusive partner in credit analysis, covers a universe of 500 companies present in bond markets all over the world, from Asia to the Americas. We emphasise high yield bonds and emerging markets, which offer interesting dynamics but require in-depth analysis.

Our team of strategy experts also analyses the news, anticipates market trends and reconciles Societe Generale Private Banking’s macro-economic views with our analysts' findings. Our presence in Hong Kong, Geneva, Luxembourg and Paris allows us to combine global coverage of markets with client proximity. Our team comes from a portfolio-management background, and exploits the bond market on a daily basis, mindful of capital protection (we have set up a risk unit for this) and always seeking the best opportunities. Investment recommendations are circulated continuously to local Societe Generale Private Banking teams and to clients.

What have you learnt from BONDS' first few months, and what are your next objectives?

O. C.: The uniqueness of our model in the private banking industry has allowed us to be very successful commercially. Clients are not only satisfied with the quality of the relationships, but also with the advice that Societe Generale Private Banking provides during the life of their portfolios. This might extend from a simple recommendation concerning a security to full advice on portfolio construction and management. Our next objectives are to strengthen the existing set-up and to actively promote the offering to our units and their clients.