(Bloomberg) -- One of Australia’s biggest fund managers is betting Donald Trump’s presidency may make U.S. banks and infrastructure companies some of the world’s best credit investments next year.
Brisbane-based QIC Ltd., which manages A$32.3 billion ($24 billion) in fixed income and cash, favors U.S. investment-grade debt as it seeks to profit from Trump’s plans to spend big to boost the economy, according to Susan Buckley, managing director of global liquid strategies at QIC. Financial services, infrastructure and consumer-driven companies will likely benefit from expected tax cuts, she said.
“These are early days but we see great opportunity,” Buckley said in an interview in Sydney. Health-care and technology firms will be less appealing amid uncertainties around Obamacare and tighter immigration policies, she said.
Trump vowed to dial back Wall Street regulations, spend $1 trillion on infrastructure and boost jobs growth. Expectations of rising inflation helped wipe $1.7 trillion, or 4 percent, off the Bloomberg Barclays Global Aggregate Total Return Index in November, the deepest drop since the gauge’s inception in 1990, as investors dumped sovereign bonds for riskier assets such as equities. Investment-grade credit including U.S. and Australian debt is still attractive on a “relative” basis, according to Buckley.
QIC is also increasing inflation protection in its fixed income portfolio and expects volatility to remain high over the next six months as Trump provides more clarity on policy direction.
“The number-one trade for us has been long inflation,” Buckley said. The money manager is forecasting an interest rate hike by the U.S. Federal Reserve at its meeting next week and is expecting another two increases next year.
QIC, which managed A$78 billion across all asset classes at the end of December last year, is also looking to invest in high-quality and shorter-dated corporate bonds in the Australian market. Energy, utility and infrastructure company debt such as those of the nation’s busiest airport, Sydney Airport, energy delivery service provider AusNet Services and toll operator Transurban Group are of interest to the fund manager, she said.
QIC signed a memorandum of understanding with one of China’s biggest fund managers, Ping An Asset Management, last month to help it deploy capital, particularly in alternative assets such as private equity, real estate and infrastructure in Australia. There could also be avenues for future cross-border flows and investments in fixed income between the two companies, Buckley said.
“We have an interest in China because it’s obviously a market that’s going through a great deal of liberalization and it’s becoming interesting in terms of its bond market,” she said.