Vincent Marioni joined Allianz Global Investors in 2014, after managing several funds specialising in European credit, notably at Natixis IM. Since 2017, he has also held the position of CIO for European Credit. We recently had the opportunity to meet him at the Media Day organised by the European management company in Frankfurt.

Vincent Marioni

What is the state of the credit market?

Vincent Marioni: "Following the market's strong recovery, spreads have fallen back to pre-Liberation Day levels on 2 April, and are unlikely to tighten much further. Unlike equity investors, credit investors require the payment of a coupon and repayment at maturity. The fundamentals are therefore important, and our first-quarter results showed good resilience. The default rate is expected to be around 3% over the next 12 months, which is still below the long-term average default rate. The situation for high yield is therefore not a cause for real concern, and the trend is even towards an improvement in ratings in the investment grade segment. We believe that the risk is acceptable, despite the high level of uncertainty linked to the tariff war".

Have you been surprised by what has happened since the start of the year?

V.M. : "The market was extremely complacent, even though it was seeing the first signs of risk materialise, with the date of the rate announcement being telegraphed in great detail. Investors were taken by surprise by this break-up, which triggered a phase of extremely high volatility. We then returned fairly quickly to the differentials that prevailed before 2 April, considering that customs barriers will not be fatal for most issuers".

Which sectors do you particularly like?

V.M. : "The European financial sector continues to have very solid fundamentals, which have been steadily improving for almost ten years. The regulators have done an excellent job, with a banking sector that is now profitable and two to three times better capitalised than at the time of the great financial crisis, with non-performing loans continuing to fall. In the event of a recession or weaker growth, banks will be much more robust than in the past. We are therefore positive on bank issuers with a decent yield on subordinated issues.

Why is this segment still more volatile despite improving fundamentals?

V.M. : "In fact, volatility in this segment woke up at the time of the Credit Suisse episode, which was a wake-up call for investors to the fact that it is possible to lose everything, particularly in the most subordinated segments. In terms of risk, this part of the market is also comparable to equity risk, with prices likely to be more affected by the risk of recession.

Are you positioned in peripheral banks?

V.M. : "Yes, because they have done a huge job of cleaning up their balance sheets since the sovereign crisis, which banks in other countries have not necessarily done, particularly in terms of branch closures. They now have cost structures that are much better than German or French banks, with profitability levels that are really very high

What about the property sector?

V.M. : "The sector was affected by the rise in interest rates, with the premium rising to very high levels. The favourable outlook for these issuers remains valid, with a cycle of falling interest rates in Europe that will have a favourable impact on the situation of these companies and a market that is now open to their refinancing. Nevertheless, we remain relatively cautious about office property, particularly for groups with exposure on the outskirts of major cities, with empty buildings that are unlikely to be occupied for a long time. On the other hand, we like the residential sector, where the rate of new construction has fallen drastically since 2022.

Even in a segment like the automotive industry, market demand remains fairly strong..

V.M. : "Some programmes ( Valeo , Volkswagen ) have recently been oversubscribed on several occasions. Demand for yield is still very strong and continues to have a massive influence on the credit market. Investors believe that the current economic situation is sufficiently robust and resilient, even if the issue comes from companies that are likely to experience weaker quarters in terms of financial results".

Are you following the same logic?

V.M. : Yes In an environment where the European Central Bank continues to lower its key rate, our scenario is that, at some point, the considerable sums invested in money market investments should logically flow into the credit markets. There is a premium on the market, and it's our job as managers to seek out the value in these issues. Overall, our portfolio is less cyclical than the investment universe, but you shouldn't hesitate to invest in issues from cyclical issuers if they offer attractive value".

What is your approach to the automotive sector?

V.M. : "The headwinds have been strong since the summer of 2024, with falling sales in China and weak demand in Europe. We believe that European carmakers will need time to adapt to this new situation, with significant overcapacity that will require restructuring. From this point of view, the risk associated with tafis represents an additional threat, particularly for German groups. And even though the premium in this sector is currently high, we prefer to remain cautious.

Can mergers and acquisitions support the market?

"In the current environment, it is difficult to value companies correctly, particularly those with exposure to the US economy. We therefore believe that mergers and acquisitions should be put on hold until the uncertainties over tariffs have been resolved. For their part, the banks have regained a certain amount of leeway to make acquisitions, and they are doing so by exchanging shares, without impacting their financial situation".

By Frédéric Lejoint