Please see below the daily update article from EPIC Investment Partners, received this morning – 04/06/2026
The OECD’s June 2026 Economic Outlook, subtitled Under Pressure, reinforces the case for maintaining positioning in high-quality sovereign and quasi-sovereign debt, particularly among issuers supported by strong net foreign asset (NFA) positions. The report highlights a materially weaker global backdrop as the ongoing US-Iran conflict and associated energy shock weigh on activity, with global growth projected to slow from 3.4% in 2025 to 2.8% in 2026 under the OECD’s baseline scenario.
Against this backdrop, the report states that investors face a combination of softer growth, elevated inflation, and heightened geopolitical uncertainty. While central banks are expected to remain vigilant against second-round inflation effects, policymakers are also confronted with weakening demand and rising downside risks to activity. This environment increasingly favours high-quality fixed income exposure, particularly sovereign issuers with strong external balance sheets, substantial reserve buffers, and positive net foreign asset positions.
Such issuers offer an attractive combination of defensive carry and fundamental resilience. Strong external creditor positions provide insulation from the fiscal, funding and currency pressures that often emerge during periods of elevated commodity price shocks and financial market stress. As a result, these markets are better positioned to withstand prolonged volatility than more indebted or externally vulnerable peers.
The investment case becomes more compelling when considering the OECD’s heavily emphasised downside scenario. Should disruptions to Middle East energy production and exports persist well into 2027, the OECD estimates that global growth could slow to just 2.1% in 2026 and 1.8% in 2027, accompanied by significantly higher inflation and tighter financial conditions. In such an environment, high-quality sovereign debt would likely be a primary beneficiary of global flight-to-quality flows as investors seek both capital preservation and liquidity.
The EPIC Next Generation Bond Fund is well positioned for this backdrop through its exposure to sovereign and quasi-sovereign issuers in countries broadly characterised by strong external balance sheets and substantial net foreign asset positions. These allocations provide access to attractive real yields while maintaining exposure to some of the most fundamentally resilient credit profiles globally. In an environment where growth risks are rising and macroeconomic outcomes remain highly uncertain; this positioning offers both defensive characteristics and the potential to benefit from increased demand for high-quality fixed income assets.
By maintaining exposure to these structurally robust issuers, the Fund is positioned not only to weather near-term stagflation driven volatility but also to participate in any subsequent rally in high-quality duration should weaker global growth ultimately lead investors back towards safe-haven assets.
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Charlotte Clarke
04/06/2026