LONDON — Bubble-like valuations in artificial intelligence and other technology stocks are prompting investors to seek risk diversification in securitised credit and other fixed-income alternatives, according to Royal Bank of Canada’s BlueBay Asset Management, which is planning a significant expansion in Australia. Royal Bank of Canada’s BlueBay Asset Management is a global asset manager. It provides investment solutions across fixed income, credit, and alternative strategies for institutional and wholesale clients. Erich Gerth, chief executive, and Camilla Love, head of its Australian operation, noted that the dominance of the “magnificent seven” tech giants in equity funds complicates efforts to build diversified portfolios against market downturns.
These market considerations, amplified by recent jitters around tech stock valuations following a US sell-off, are driving Australian institutional interest in alternative markets. Ms. Love highlighted collateralised loan obligations as particularly appealing, explaining that with corporate bond spreads tight, more complex fixed-income products offer better value. This shift reflects a demand for idiosyncratic risk adjustment and a desire to balance equity volatility. Mr. Gerth added that even emerging market equity funds are increasingly tech-heavy, challenging true diversification.
RBC BlueBay, managing approximately US$571 billion, aims to nearly double its assets under management to US$1.1 trillion over the next five years, with Australia a key growth market. Having been present in Australia since 2017, the firm appointed Ms. Love in April to lead its operations in Australia and New Zealand. She confirmed targets include major superannuation funds, high net-wealth individuals, and family offices, in Australia’s rapidly growing wealth market. Priority areas encompass investment-grade credit, emerging markets debt and equities, and alternative hedge fund capabilities. Ms. Love noted that AI and data centre investments reshape Australian flows, increasing demand for infrastructure and energy, requiring careful valuation consideration. Institutions are evaluating private credit segments as ASIC increases oversight.
