Hawksmoor Investment Management’s Vanbrugh fund has sold the Henderson strategic bond fund in favour of another Henderson fund that provides exposure to secured loans.
The strategic bond fund, managed by John Pattullo, had featured in Vanbrugh since the fund of funds was launched in February 2009.
But Hawksmoor’s multi-manager team felt it no longer provided exposure to where they wanted to be in bond markets and replaced it with the closed-ended diversified income fund, also managed by Pattullo.
Through diversified income, Hawksmoor has exposure to secured loans with coupons, or returns, that are Libor-linked, unlike corporate bonds where coupons are fixed. Libor-linked coupons are attractive because a rise in interest rates means a rise in coupons.
Interest rate rises are negative for corp- orate bonds because fixed coupons start to look unattractive relative to the level of risk investors are taking to achieve that return. Investors start to sell out of corporate bonds, they fall in value as prices go down and then yields go up to make them more attractive.
Fund manager Daniel Lockyer says: “Under the IMA cautious managed sector rules, we have to have 30 per cent in fixed income and cash, but we do not really want fixed income in our bond exposure. We are trying to be a bit clever about how we can meet the IMA guidelines without having to put money in an unattractive asset class.”