The rise of defaults in the US sub-prime mortgage market has contributed to the volatility of bond markets but Fidelity says economic data indicates that the issue remains isolated and the market movement is starting to provide investment opportunities for portfolio managers.
Fidelity Investment Funds moneybuilder income fund portfolio manager Ian Spreadbury says: “Fidelity’s moneybuilder income fund does not hold US sub-prime mortgages. It also does not hold any collateralised debt obligations or any other structured products that may contain exposure to sub-prime mortgages.
“The recent market volatility has brought spreads more in line with fair value and I have taken this opportunity to increase exposure on a selective basis, particularly to utilities and telecom sectors. I have also retained my small overweight exposure to high-yield and emerging Europe in issues where I have a high level of conviction.
“I have moved the portfolio from an underweight duration position to a modest overweight duration position as I believe the future path for short term interest rates is now more balanced after this significant credit spread widening.”