The world of rates is turned upside down. One fifth of outstanding bonds has negative rates, which means that the debtor receives interest from the creditor. In circulation there are about over 16 thousand billion dollars (in value) of sub-zero bonds. This is not a temporary situation but a structural issue if we consider that most of these bonds come from Europe and Japan, two economic areas that are in full monetary expansion. Precisely the accommodating policies of the central banks – and the ECB last week confirmed this direction by launching the quantitative easing 2 – is the main cause of the negative rate bond paradox.

Extracting returns from financial assets has become more complicated. The Exchanges indirectly benefited from the expansionary policies because most of the liquidity ended up on the equity assets. It is no coincidence that Wall Street is a step away from the historical record while the stock exchanges in Frankfurt and London are far from their peaks less than 10 percentage points.

In short, the bond market is on the bubble, while stocks at this stage are certainly not at a discount. It goes without saying that for an investor to extract value from financial assets has become decidedly more complicated in this new era of ultra-low rates, when not exactly negative.

In the market, however, there are niches that, statistics in hand, continue to offer attractive returns that on average over the last few years have resulted in double figures.

ECB, new QE of 20 billion a month (without maturity) and cut rates: here is the bazooka of Draghi
by Riccardo Sorrentino

Fca-Psa, all the advantages of a global merger between platforms and shared technologies “And there are all the reasons to believe – explains Stefano Reali, deputy director of Pharus Management Sa – that the trend will remain the same also in the coming years”.

What area are we talking about? “We move within the utilities active in energy transport (gas, water, ed) – continues Reali -. The second characteristic is that the sector must be completely regulated. In their turnover there must be no variables that are not established by the rules. Third aspect: it must be de facto monopolies. Fourth: the business must be counter-cyclical and the revenues must not depend on variable elements such as the volumes and / or the price trend of the raw material transported. These conditions lead us to exclude equally regulated sectors, such as motorways and airports whose business depends on volumes and therefore on the cyclical trend of the economy “.

How is it possible for turnover to be released by variable elements? “The gain of the companies that respond to these characteristics – continues the expert of Pharus – is defined starting from the State with mathematical formulas based on which remunerates the companies for the investments they have to do to develop and maintain the networks they have in management. These investments are remunerated in advance according to mathematical formulas that also cover the occurrence of negative external variables, such as the surge in inflation or the fall in the price of government bonds.

In essence, the turnover of these companies depends entirely on the regulatory mechanism and is based on the fact that they are remunerated by the State for the investments that these companies, monopolists, make on networks that manage and that are national strategic assets. Earnings are established in advance by independent regulatory authorities “.