Spotlight on Stephen Tapley, Senior Portfolio Manager, Royal London Asset Management
Global Thought Leader Spotlight
Stephen Tapley, Senior Portfolio Manager, Royal London Asset Management
In my role as a Senior Fund Manager at Royal London Asset Management, I am the lead manager across global high yield credit strategies.
I am responsible for portfolio construction, security selection and risk management within a global opportunity set.
My focus is on trying to help generate consistent income, while seeking to control volatility and reduce default risk. I work as part of a collaborative global credit team, applying fundamental credit analysis and disciplined valuation, while integrating ESG considerations as part of our assessment of material risks and opportunities across market cycles.
Volatility driven by government bond markets rather than deteriorating credit fundamentals
A key theme in global high yield has been the re‑emergence of volatility driven by movements in government bond markets, as investors grapple with changing inflation and growth expectations.
While credit spreads have widened at times, this has often been offset by moves in the underlying risk‑free curve. Importantly, corporate fundamentals have remained relatively resilient and default rates are still low, suggesting that volatility is being driven more by macro uncertainty than a broad deterioration in issuer quality.
Growing dispersion across ratings, sectors and issuers
Market conditions have highlighted growing dispersion across the credit spectrum. Lower‑rated credits have experienced more pronounced spread widening than higher‑quality segments, reinforcing the importance of credit selection.
Recent credit events have also underlined the risks of over‑reliance on external credit ratings, with rapid repricing following sudden changes in liquidity, leverage or shareholder support. This dispersion creates both risk and opportunity for active managers with strong fundamental analysis.
The defensive role of short duration in a late‑cycle environment
With uncertainty around the future path of interest rates and the risk of renewed commodity‑led inflation, a short duration bias offers a more defensive way to access high yield markets.
Short‑dated bonds can benefit from reduced sensitivity to interest‑rate and spread volatility and from the pull‑to‑par effect as maturities approach. Despite tighter spreads, yields in this part of the market remain relatively attractive.
Balancing near‑term uncertainty with longer‑term structural change
Markets are being asked to price risk through a highly unsettled climate, including geopolitical tensions and slower global growth, alongside the prospect of longer‑term productivity uplift from technological change such as AI.
While this technology may support growth over time, it also has the potential to disrupt entire industries, reinforcing the need to focus on robust balance sheets and resilient business models.
Implications for sophisticated investors
Separating market turbulence from credit risk: In the current environment, investors are being asked to price risk through a highly unsettled climate.
Changing inflation and growth expectations, renewed geopolitical tensions and volatility in government bond markets have been key drivers of market moves, often outweighing changes in underlying credit fundamentals.
While spreads have widened at times, default rates remain relatively low, reinforcing the importance of distinguishing between macro‑driven volatility and genuine credit deterioration.
Credit research must increasingly substitute for ratings: This backdrop places a greater premium on robust credit fundamentals and careful issuer selection. Episodes of sharp repricing have highlighted the risks of over‑reliance on credit rating agencies and the need to focus on balance‑sheet strength, liquidity and cash‑flow generation.
Increasing dispersion across sectors, regions and ratings reinforces the value of fundamental analysis and a selective approach.
Short duration credit becomes a strategic allocation, not a tactical tilt: From a portfolio construction perspective, it's my view that the case for short date high yield extends beyond defensiveness.
Pull‑to‑par mechanics, predictable cashflows and frequent reinvestment points offer institutions a way to compound income while retaining flexibility in volatile macro regimes.
Remain flexible and focussed on fundamentals amid disruption: At the same time, investors must balance near‑term macro uncertainty with longer‑term structural forces. While technological change, including AI, may support productivity over time, it also has the potential to disrupt entire industries.
In this context, maintaining flexibility and relying on resilient business models and credit fundamentals feels less like caution and more like a sensible anchor in uncertain times.
Stephen will be presenting at Global Investment Institute’s upcoming Private Wealth Investment Leaders Forum, taking place on Wednesday, 13 May 2026 in Melbourne CBD, Victoria. To register your interest in attending, click here or for more information email zlatan@globalii.com.au.
Stephen Tapley, Senior Portfolio Manager, Royal London Asset Management
Stephen is a Senior Portfolio Manager at Royal London Asset Management. He has 17 years’ experience of investing in global credit.
Stephen started his career at Gulf International Bank as a High Yield analyst, before moving on to Scottish Widows Investment Partnership. In 2012, he joined Royal London Asset Management where he helped to launch the Global High Yield and Short Duration Global High Yield strategies and has co-managed them since their launch in 2013.
Stephen is a CFA Charterholder and holds an MSc in Financial and Industrial Mathematics from Dublin City University.
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