Hawksmoor Investment Management launched its distribution fund this week, with around 60 per cent of the portfolio invested in the same holdings as the existing Vanbrugh fund.
The fund has been designed as an income version of Vanbrugh to fill a gap in the market. It says just 12 per cent of all multi-manager funds have an income or distribution mandate.
PFS Hawksmoor distribution follows the same investment process as Vanbrugh, which Hawksmoor has adhered to despite the challenging market environment.
The firm says its preference for shares and corporate bonds over other assets has worked to its advantage in Vanbrugh this year. But it expects the fallout from the global financial crisis and the eurozone problems to cause further twists and turns in the markets.
Hawksmoor says it is difficult to produce good risk-adjusted returns, especially when interest rates are below inflation. This generates negative real returns from cash and UK government bonds, which are often seen as low-risk.
Hawksmoor is negative on gilts because it feels the returns do not compensate investors for the risks involved. It says the popular view of government bonds being low-risk was challenged in mid-March when yields fell sharply on the back of various pieces of good news, meaning their prices rose. Then within a few days, the price of the 30-year gilt fell by 5.5 per cent while the undated war loan fell by 15 per cent.
Chief investment officer Richard Scott says: “The exceptional performance of government bonds in recent years may make them statistically less risky, when common sense implies that investing in them at record low yields is a more risky proposition.”