In focus
difficult to find assets that offer real
diversification,” Rush says.
“Our point is that in an
environment where assets have
become correlated, it seems a bizarre
move to introduce one that is widely
known to correlate heavily with
equities in a falling market.”
For managers of strategic bond
funds, which can invest across the
The high yielder:
Schroder High Yield
Opportunities
Schroder High Yield
Opportunities tops the yield
charts with a payout of 6.5
per cent. The £542m fund,
managed by Daniel Pearson,
uses Schroders’ global fixed
income team to analyse
countries and sectors that
are often ignored. Pearson
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fixed income spectrum, Rush notes
the argument is different. This is
because high yield is often the only
equity-like risk asset available.
“However, for multi-asset managers
such as ourselves, it is already easy
to introduce equity risk/beta into
a portfolio without doubling down
in the fixed income allocation as
well,” he argues. “Fixed income
has traditionally been used as the
defensive backbone of multi-asset
recently said riskier parts of
the financial markets “still
don’t seem to fully reflect
economic reality”. As a
result, he is continuing to
seek “the pockets of value
where systemic or top-down
factors may have led to
mispricing”. The fund is the
fourth-best performer in the
sector over five years with
gains of 32.95 per cent.
The strategic option:
Baillie Gifford Strategic
Bond
For investors who want
some exposure to high yield
but don’t feel comfortable
buying a fund entirely
devoted to the sector, Rush
recommends Baillie Gifford
Strategic Bond. The fund,
managed by Torcail Stewart
and Lesley Dunn, currently
portfolios. The issue now is many of
these assets look expensive relative
to history and suffer from significant
asymmetric risks to the downside.”
With these “safe haven” assets
looking expensive, Rush says taking
additional credit, liquidity and
default risk through an explicit
allocation to the high yield sector is
something IBOSS wishes to avoid.
“Though the temptation to eke out
some extra return through higher
has a 30 per cent weighting
to the asset class. “It has
generated first-quartile
returns over one, three,
five and 10 years and has
successfully outperformed
the IA Sterling High Yield
sector over the same
periods,” says Rush. Baillie
Gifford Strategic Bond has
made 30.78 per cent over
the past five years.
yielding funds remains, we believe
that fixed income should act as the
ballast for a multi-asset portfolio,”
he concludes.
“The spread of many high yield
bonds over the so-called risk-free rate
of the 10-year Treasury still seems
unappealing to us. With this as the
backdrop, we continue to hold short-
dated investment grade corporates,
longer-dated high credit-quality
sovereigns and cash.”
near: bonds that are unrated,
namely those where the
company does not pay the
large rating agencies to get
Yearsley’s high yield fund
itself graded. This is fairly
of choice also sits in the
unique in the sector.” The
IA Sterling Strategic Bond
sector: Royal London Sterling fund currently yields 5.51
per cent, which is the third
Extra Yield Bond. “We like
highest figure in its peer
the manager [Eric Holt]
group. It is the second-best
and the process,” he says.
performer over five years,
“It can invest in areas that
with gains of 40.88 per cent.
most managers won’t go
The unrated choice:
Royal London Sterling
Extra Yield Bond
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