I am writing this article just a couple of days after having attended a European Credit Conference in London last week, organised by one of the largest Investment Banks, with over 1,200 attendees.

With 48 sessions, across eight different themed rooms, the 12-hour day was always going to be jam packed, but that didn’t stop me from dashing from one room to another, jotting down every single piece of information (or quote) I could find useful, whilst trying to get the best seat in the room and grabbing a bite in between sessions.

Sessions were all well-attended, from macro to micro, from stock picking to emerging markets, from European Credit to US High Yield credit, from Subordinated financials to global politics; these are just a few of the themed presentations delivered at the conference which I was able to attend and which deemed to be of particular interest to me.

One of the prevalent themes at the conference was the uncertainty in the markets and the fact that things didn’t pan out as analysts, strategists and investors alike expected.

The Greek crisis, selloff after the QE rally, weakness in emerging markets, uncertainty about the next Fed rate move – many question marks which, to date, no one really has any answer about.

One extreme panelist suggested that one possible solution to stimulate the market would be the wiping out of debt of some economies, which will serve in the medium term to propel market growth rates, whilst on the other hand, we’ve also had one of the key panelist criticise the Fed’s decision making, based on inflation models which have clearly shown inaccurate results (or rather signals), which appear to be at a disconnect with the markets.

The presentation with the greatest attendance was the Emerging Markets, which did not come as a surprise really given the fact that the summer months were characterised in the main by a marked weakness in emerging market economies and commodities. Surprisingly, the analyst was far more bullish on the longer term prospects of EM than many of the delegates, adding however that volatility and uncertainty in the short-term is here to stay, creating attractive opportunities.

Elsewhere, in the ‘financials’ room, panelists made it clear that financial institutions are still coming to terms as to how they will adapt to the ever evolving regulatory framework over the coming years. In the meantime, appetite for financial bonds, particularly AT1s (deeply subordinated debt) remains strong, with spreads within this space expected to tighten against higher-rated subordinated paper.

The European credit strategist remained constructive on the long term outlook for credit, whilst highlighting the lack of clarity over shorter term prospects for spreads. He added that whilst the recovery is dependent on a resumption of inflows into the asset class, investors will find it difficult to get comfortable with risk until the prognosis stabilises.

All in all, there seems to have been consensus among all strategists, and that is that whilst the world’s global economy might not be in the greatest shape, credit still appears to offer a cushion at times of heightened volatility. However, one particular strategist added that the market seems to be worried that low yields have led investors into alternatives that were not diversified and not even cheap. Given the murky economic backdrop, there seems to have been unanimity that a bottom up analysis and a healthy mix of strategies will mitigate market risk over the next few months.

Disclaimer: This article was issued by Mark Vella, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.