FIXED INCOME FUNDS
“FUNDS WILL VARY IN
THE LEVEL AND TYPE
OF RISK THEY PRESENT
AND INVESTORS SHOULD
BEAR THIS IN MIND”
yield bonds, sell off. “As such they
would perhaps best be viewed as
an insurance policy in the current
environment,” she said.
Index-linked gilts have the simple
aim of protecting investors’ capital
of money flooding into the system
via quantitative easing mean they
have been anything but in recent
years.
Cockerill says the 10 to 12 per
cent drop in returns from 50-to55-year gilts in a short period
of time is an illustration of this
risk and shows how artificial the
market has become.
However, Hasler says gilts can
still be useful in portfolios as they
are “risk off” investments and
tend to do well when other asset
classes, such as equities and high
25%
and income from the effects of
inflation. While this is not an issue
worrying investors right now, Hasler
notes they “could do worse than
have some inflation protection in
their portfolios”.
Performance over 3yrs
M&C - Glogal High Yield Bond (22.38%)
20%
IA Sterling High Tield (22.02%)
15%
10%
5%
0%
Jan15
Oct
Jul
Apr
Jan 14
Oct
Jul
Apr
Jan 13
Oct
Jul
Apr 12
-5%
Source: FE Analytics
Bonds for all
THE CAUTIOUS
FUND: BLACKROCK
CORPORATE BOND
This fund, managed by
Ben Edwards and Simon
Blundell, currently
yields 3.8 per cent.
However it is the fund’s
£400m size that makes
it most appealing for
Cockerill. “This is a
well-run mainstream
fund that does not
look to do anything too
clever,” he said.
“However, versus the
bigger funds in the peer
group which struggle
during big sell-offs, the
fund’s size allows the team
to quickly make changes
to the portfolio, such as
selling out of a position.”
The two crown-rated
fund sits in the second
quartile of the IA Sterling
trustnet.com
Corporate Bond sector
over three years and in the
third quartile over one.
THE MEDIUM-RISK
FUND: HENDERSON
STRATEGIC BOND
Despite the presence
of the award-winning
Richard Woolnough in the
Strategic Bond sector,
Cockerill plumps for
the Henderson duo of
John Pattullo and Jenna
Barnard for his pick of
the medium-risk choices
within fixed income.
He describes this as “a
proper strategic bond
fund” owing to the way the
managers alter duration
and the fact they “are not
afraid to make decisions
based on what is going
on in the market place”.
Size again played a part
in Cockerill’s choice.
While he is an admirer of
Woolnough, for him the
£24.5bn size of the M&G
Optimal Income fund is
an issue, especially with
his prediction of a bond
sell-off on the horizon.
Henderson Strategic
Bond is yielding 5 per
cent.
THE HIGH-RISK FUND:
M&G GLOBAL HIGH
YIELD
Although Cockerill does
not hold this fund at
the moment, it is
his high yield
fund of choice.
He says it
is more
cautious
than its
peers
owing to
managers Stefan Isaacs
and James Tomlins’ fairly
defensive positioning.
Cockerill says that despite
the fact it has a strong
yield of about 5 per cent, it
achieves this while taking
on less risk. It is currently
ranked second quartile in
its sector over both one
and three years. It has
three FE Crowns and is
£1.2bn in size.
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