In the corporate bond market, larger companies tend to be the largest issuers. However, they also generally have the largest asset bases and revenues to service that debt.
Many of these companies are blue chip, such as JPMorgan Chase, AT&T and Verizon. In fact, a majority of the top issuers in the index are also in the top 125 holdings of the S&P 500 Index.
At the same time, do not put all your eggs in one basket.
Passive options can be used as a hedging tool and as a liquidity transfer mechanism, along with the ability to gain cheap access to a core defensive and liquid market.
Active managers in the high-yielding and emerging market debt sectors on the other hands can capitalise on macro and micro risks, provide depth of coverage to anticipate downgrades, defaults, upgrades or manage rating misclassifications.
Elliott Frost is investment manager at Lumin Wealth
