The right kind of risk helps bond fund dou­ble its money

The Scotsman - - Farming - Barry O’neill

DOu­BLInG the size of your fund in the space of a year must be some sort of in­di­ca­tion that the man­agers are do­ing a good job.

David Roberts, co-man­ager of the Ae­gon Strate­gic Bond fund, en­joys the flex­i­bil­ity of be­ing able to in­vest across the fixed-in­come spec­trum. The fund aims to take ad­van­tage of the op­por­tu­ni­ties across global bond mar­kets, ac­cord­ing to Roberts.

He said: “We in­vest in ap­pro­pri­ate parts of the mar­kets

“We in­vest in ap­pro­pri­ate parts of the mar­kets where the risk is at­trac­tive”

where we think the risk is at­trac­tive. At any time the fund can be 100 per cent in­vested in G7 govern­ment bonds, or in­vest­ment grade cor­po­rates, or high yield cor­po­rates.”

The fund nor­mally has be­tween 20 and 80 hold­ings and is cur­rently at its up­per limit, prin­ci­pally be­cause of the large in­flows and the fact that it is about 70 per cent in­vested in cor­po­rates, where smaller stakes are taken in or­der to avoid in­creas­ing the stock-spe­cific risk.

Roberts was keen to stress what the fund does not do.

“There are no cur­rency plays at all,” he said.

“De­spite the fact that over the half the fund is in­vested in non­ster­ling-de­nom­i­nated is­sues, it is 98 per cent hedged back to ster­ling. It’s not that we think try­ing to make money from cur­rency is bad, it’s just a dif­fer­ent kind of risk and one we don’t want in this fund.”

One of the core hold­ings in the fund is BAA. “The bonds are 90 per cent se­cured on Heathrow, which has been re­mark­ably re­silient dur­ing the global eco­nomic down­turn, with its pas­sen­ger and cargo num­bers hold­ing up much bet­ter than other Euro­pean hubs such as Schipol in Am­s­ter­dam,” Roberts said.

At present BAA bonds yield about 2.25 per cent more than equiv­a­lent ma­tu­rity gilts and about dou­ble the ex­cess yield on sim­i­larly rated util­ity com­pa­nies.

Roberts ex­pects this dif­fer­en­tial to nar­row, as the mar­ket gets more com­fort­able with the fun­da­men­tal out­look for the com­pany.

In­vestors in the fund en­joyed a spec­tac­u­lar 37.3 per cent re­turn last year, but Roberts was ea­ger to man­age ex­pec­ta­tions for 2010.

“I said at the end of 2009 that it would be dif­fi­cult for clients to make money from any as­set class this year. I felt that a to­tal re­turn of 10 per cent would be wel­comed by the ma­jor­ity of our in­vestors and thank­fully we’re on track to de­liver that this year”.

l For more in­for­ma­tion on the Ae­gon Strate­gic Bond­fund call 0800454422 or vis­­o­ Barry O’neill is a char­tered fi­nan­cial plan­ner with Thom­son Shep­herd Ltd (in­cor­po­rat­ing Coggans Wood).

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