BIRKHÄUSER DWS is a global asset management firm with German roots. We have colleagues based in Asia Pacific, Europe and the Americas. Notwithstanding this, the core of our business remains rooted in Germany and neighbouring European countries.

Here in Frankfurt, our primary focus is on euro markets. While we have teams in the US covering US dollar markets and others here working on global corporates, my team – comprising about 13 people – specialises in euro investment-grade corporate bonds.

Within this specialisation, Australian issuers have always been significant for us. Thanks to our global setup, we are able to leverage local expertise to bring unique investment ideas to clients beyond the core European region. For example, I cover some Australian infrastructure names, while a colleague in Mumbai conducts in-depth research in the space, given the timezone proximity.

I often maintain an overweight position to Australian issuers. We view this segment as somewhat under-covered by our peers, which means there can be opportunities for additional yield. It is not that there is always a pick-up, but we certainly focus on identifying value in this area.

On the fund management side, I work with institutional clients and retail strategies, many of which emphasise sustainability. These include the ESG Euro Corporate Bond Fund, the Low Carbon Corporate Bond Fund and my personal favourite – the Green Bond Fund.

BIRKHÄUSER We realised that Australian airports, for instance, held even greater importance than many of their counterparts in continental Europe due to a lack of alternatives. This systemic importance created strong investment opportunities.

With airports, we have often observed spreads offering an additional 40-60 basis points compared with assets with similar credit quality in other markets. While this spread has tightened over the past 4-5 quarters – particularly toward the end of 2023 and early 2024 – it has historically presented attractive opportunities. Many of these spread differences seemed to lack fundamental justification, making them
all the more compelling.

Similarly, toll roads like Transurban have been a consistent part of our portfolio. These proved to be excellent investments during and after COVID-19. While there was a temporary dip in traffic during the pandemic, we were confident in the critical role these assets played in the regional economy and their ability to recover quickly. As a result, we invested significant time and effort into these infrastructure names.

BIRKHÄUSER Liquidity is there although it can vary. For example, with Transurban, we were early investors and initially noticed somewhat lower liquidity compared with French names. However, this presented opportunities to enter trades and, over time, liquidity improved as demand increased and the market recognised the quality of the assets.

Also, liquidity is a two-sided issue. Australian infrastructure issuers’ peers are often French or Italian names, which are heavily held by institutions like the ECB [European Central Bank] or French investors and thus have limited free float. By contrast, Australian issuers often offer relatively larger free floats and we have never encountered significant difficulties trading these names – even with private placement bonds.

When I look at the screen, there are fewer quotes and slightly less visible liquidity for Australian issuers. However, in practice, I have never had issues executing trades – and it hasn’t been more expensive.

BIRKHÄUSER Yes, but it is not so much about liquidity. For us – and I assume others with similar models – we assign a responsible analyst to every name we invest in. If there is just a single bond, and it doesn’t stand out as an attractive diversifier, we are quite likely to pass on taking it up.

For larger players like us, having a broader curve of outstanding bonds is essential. It clearly becomes a significant part of the investable universe. Once we commit to covering it, it’s easier to stay involved and maintain the trade.

BIRKHÄUSER We follow a two-step approach: assessing whether an investment qualifies as a green bond and then evaluating its broader sustainability credentials. We are particularly eager for green bonds, and not only within the dedicated green-bond strategy.

Also, under European regulations there is a defined requirement for a sustainable revenue share – a minimum threshold that funds must meet. We refer to this as a “minimum floor” of sustainable revenue share and, while the specific percentage depends on the fund, it’s always a defined number. Green bonds, provided they meet certain criteria, contribute 100 per cent toward this sustainable revenue share.

As a result, demand for green bonds isn’t limited to my dedicated strategy – almost all my colleagues have a need for them in their portfolios as well. That’s why, whenever I meet Australian corporates, I always ask if they have the capacity to issue green bonds.

In Europe, even airports issue green bonds, for example, when they renovate buildings or undertake sustainability-related projects. I always try to advocate for such opportunities. While we have seen some green-bond issuance from banks, there’s very little overall.