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‘Bonds at risk under Ucits III’

Some bond fund managers using new investment flexibility available under Ucits III are putting money at risk because they do not have the necessary skills, says Credit Suisse multi-manager co-head Gary Potter.

He is concerned that many managers do not have the knowledge to use the new tools, such as credit derivatives and stock-shorting and are inadvertently raising the risk profiles of funds. Potter said the issue is more of a problem in the bond sector where take-up of Ucits III has been greater.

He said: “The new powers available under Ucits III are good tools to have but they are a completely different skill set. There are some managers, particularly in the bond sector, who do not know how to use the new powers and are just playing with them.”

“We have to make sure fund managers have mastered the skills and investors understand that new rules do not automatically mean better returns.”

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