The Investment in Bonds is divided into the two different types; Government Bonds and Corporate Bonds due to their different characteristics in regards to risks and return.
Government Bonds are normally a very secure investment asset. They are debt obligations issued by the government of a Country, where the revenues from the bonds are generally used for financing government projects or activities.
The fact that the Country has the obligation for the repayment of the debt makes this the most secure investment asset set aside cash.
As this investment asset has a very low level of risk, the returns are also in the low end. However, as several emerging countries are using this to funding their way to become industrial countries, that particular market represents some good opportunities, where the return are higher than when investing in government bonds from Western Countries. The risk is considered higher, but as many emerging countries issues their government bonds in Western Currencies like USD and EUR, the only risk is based on whether the country as maturity can repay the obligations.
With careful analysis, the Company believes itself to be very efficient in identifying several good investment objectives.
Corporate Bonds are based on the same structure as Government Bonds, though it’s the issuing Corporation who has the obligation to repay the debt. The revenues from the bonds are then generally used for financing expansion in the Corporation, and the earnings from the expansion and current corporate operation shall then fund the repayment at maturity.
The fact that the Corporation has the obligation for the repayment of the debt makes this a riskier investment than a Government Bond.
As this investment asset has a higher level of risk, the returns are also higher. However, to consider any Corporate Bond as an Investment Asset for the Company, all have to be rated by an appropriate Rating Agency, as else the risk it too difficult to analyse. The normal Rating Agencies are Standard & Poor, Moody’s, Fitch and AM Best.
With careful analysis, the Company believes itself to be very efficient in identifying several Corporate Bonds as good Investment Assets.