Where bond fund managers are finding pockets of opportunity
Finding compelling investment ideas and solutions in global fixed income markets has hardly ever...
As we head into the New Year, we identify five fund managers to watch in 2018:
Japan is one of the few equity markets where we still see value. The stock market has had a great run, but it is still some 40% off its long-term peak. Shinzo Abe has just won a snap election and maintained his super-majority, giving him a fresh, supported mandated to continue with his reforms. With global growth looking healthy, we think there are some exciting opportunities to be found. Sarah Whitley, who currently heads up Baillie Gifford’s Japan team, is retiring in April after 37 years in the job. Matthew will be taking on management of Baillie Gifford Japan Trust too. We don’t think he’ll have a problem stepping into her shoes in managing the trust as well as Baillie Gifford Japanese fund.
Another equity markets we like is Europe. It has lagged the UK and US in terms of economic recovery, and it wasn’t until 2017 that the economy started showing signs of health. It’s a vast continent and there are many world-leading companies. Jupiter European was our second most viewed on the website in 2017 – not bad considering the asset class is unloved by UK investors. Should they choose to invest in 2018, this fund’s popularity among fund researchers should bode well.
The UK Equity fund has a value-driven approach – but has managed to consistently outperform over the past few years, even though the style has been very much out of favour. It invests predominantly in UK companies of all sizes, but can also invest in continental European companies which derive a substantial part of their revenues from the UK. Man GLG UK Income has the ability to invest up to 20% in corporate bonds – a flexibility that sets it apart from the majority of its peers. This fund has performed exceptionally well since Henry took over in 2013 and has a yield of 4% too. If value comes back in to favour, it could do even better.
Since its launch in 2010, this fund has been invested mainly in short-dated bonds to decrease its sensitivity to interest rates rise. Despite this, it has still managed to outperform and produce a decent yield (currently 5.5%). Liontrust Monthly Income Bond has the flexibility to invest in longer dated bonds as and when rates normalise. As monetary policy is reversed, it should come into its own.
Having celebrated the third anniversary of his fund in June at the top of the UK equity income sector, Neil has since had a torrid six months with various stock-specific issues – not least experiencing one of his top ten holdings falling by 70%. All eyes will be on Neil in 2018 to see if he can turn things around. He’s very candid and thinks Brexit will have less of an impact on UK companies than some are saying, but also thinks that equity markets are in bubble territory. He’s made some big calls before and been proved right. We continue to back him.