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Distinction portfolio adds value through diversity

Armstrong Investment Management, manager of the Distinction cautious absolute return fixed income fund, is looking at absolute return fixed income and strategic bond funds to provide uncorrelated sources of return.

Armstrong believes these types of funds can add value to the Distinction portfolio as they do not have rigid benchmarks. The portfolio has about 30 per cent in absolute return bond funds and 28 per cent in strategic bonds.

Absolute return funds are seen as a good fit as they have a similar strategy to the Distinction portfolio.

The absolute return funds held by Distinction are Ignis absolute return government bond, BlackRock absolute return bond and Kames absolute return. The strategic bond fund holdings are M&G optimal income, Newscape strategic bond, TwentyFour dynamic bond and Investec strategic.

The specialist fixed-income managers who run the underlying funds will sometimes agree with AIM’s views on fixed-income markets but at other times they will disagree.

The fact that the asset allocation of the underlying funds may not always reflect the overarching views of the multi-manager does not present any problems for AIM. The firm sees the diversity that opposing views can bring to the portfolio as another source of flexibility and uncorrelated returns rather than complicating its own asset allocation decisions.

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