The Elite Fitzwilliam strategic bond fund is one of the few fixed-income funds of funds available to UK investors. Manager Kristian Cassar says the UK has a bias towards equities so it is not surprising that the relatively new fund of funds’ market has focused on equity and multi-asset funds containing equities.
Cassar says it is impossible for one manager to be a specialist in all areas of the fixed-income market.
He says that single-manager strategic bond funds may move between sectors but will leave some out if the company they work for does not cover those areas.
In contrast, fund of funds can cover the whole fixed-interest market by using specialist managers in each sector and region.
Elite Fitzwilliam strategic bond has produced a positive return of 9.3 per cent this year as at July 16, outperforming the IMA strategic bond sector by 2.32 per cent. It has lost 6.88 per cent since launch – 1.47 per cent less than the sector average.
Cassar believes the fund of funds structure compensates for the higher costs relative to single-manager bond funds.
He says: “Our fund is ahead of the sector since launch and this year. It is true that costs are a drag on performance, as any fund of fund structure will increase the total expense ratio, but we can add value in selecting good managers and through asset allocation.”