High yield bonds: five reasons they still offer good value
Investors have withdrawn more than £2.5bn from fixed income funds in the first two months of this...
Following our annual investment committee meeting, FundCalibre has awarded five new funds an Elite Radar rating.
The Elite Radar is a special badge for funds whose managers may not have the minimum track record to gain a full Elite Rating, but which are on our research team’s watch list and are potential candidates for the future. These funds may be newly launched or have had a recent manager change, for example. The idea is that if we are watching these funds, investors may like to do the same.
This fund offers a focused, high conviction portfolio of quality growth European equities, with no constraints on regional or country allocations. Manager Zehrid Osmani takes a long term approach believing that it’s important to avoid short-term noise and focus on a 5 to 10 year time horizon. He has considerable experience of investing in this way and a strong track record from his days managing similar funds at BlackRock.
Manager Jochen Breuer has a dividend focus, but he does not look for yield alone: the fund will pay a decent yield around 30-40% above the wider market, but also offer some capital and dividend growth. Jochen likes to invest in high quality franchises, with good balance sheets, good levels of cash and strong management teams who understand capital allocation. While the portfolio favours high quality companies, Jochen will not invest in them at any price so the fund has a value tilt.
Co-managed by Edmund Harris and Mark Hammond, this fund follows a tried and tested process, which has proved successful with their Asian and global equity income funds. The managers do not look for income until the latter stages of their process. This ensures they don’t miss out on good companies just because they are paying a smaller dividend. They have a one in-one-out approach, and the final 36 stocks in the portfolio are equally weighted.
This is a concentrated fund, focusing on small and medium-sized companies across global emerging markets. Kunjal Gala has recently become manager of this fund, though the investment approach remains unchanged. Kunjal takes the wider macroeconomic picture into account when thinking about overall country weightings, and looks for undervalued quality companies – or as he describes it: “great companies at good prices, or good companies at great prices”.
Manager Mike Scott enjoyed considerable success managing the Schroder High Yield Opportunities fund. He has joined Man GLG to launch this fund and it has a similar process, with the added flexibility of being able short bonds. However, this is not an absolute return fund and Mike is a firm believer in high yield bonds as a long-term asset class. The fund is unconstrained and invests globally, although the main emphasis is on the UK, North America and Europe.