View more on these topics

Henderson turning to corporate bonds

Henderson’s multi-manager team is increasing its exposure to investment-grade corporate bonds as prices already reflect a major recession and higher default rates, particularly in the banking sector.

The firm points out that the gap between yields on gilts and corporate bonds has widened dramatically in the last six months.

In the financials sector, these spreads imply one in five UK banks going bust over the next five years, which Henderson believes is unlikely. It believes the economic assumptions reflected in bond prices are worse than the likely outcomes despite the fact that global growth is slowing.

The firm points out that central banks are already acting to avert a major global recession and that the corporate sector is in good financial shape.

Against this backdrop, Henderson recently added the Old Mutual corporate bond fund and the Pictet Asian local currency debt fund to its distribution and income & growth portfolios. This marks a departure from the team’s use of strategic bond funds in the last few years, when it felt that with no clear opportunities, it was better delegating asset allocation within fixed interest to strategic managers who were very close to bond markets.

The Old Mutual corporate bond fund was chosen to provide pure exposure to investment-grade corporate bonds, including financials.

Henderson says this fund has had a difficult time in the last nine months because it is so focused on investment-grade corporate bonds but expects it to provide the potential for positive returns with limited downside risk.

The Pictet Asian local currency debt fund was also chosen for its attractive risk/reward trade-off.

Co-manager Katy Gladstone says: “Overall, we think that this product can act as a useful diversifier for our port-folios while giving exposure to a number of attractive themes and paying an attractive yield. It is an appealing combination.”


Beyond comparison

Down the road from me, there is an empty shop. It has been vacant for the best part of two years, probably a while longer. It is hard to see it ever returning to its former role – as a branch of Winsover Howden, a broking firm with a proud tradition in London and the South-east.

Life companies fail on open market option

The FSA has warned life companies that Open Market Option standards for annuities must dramatically improve after uncovering shocking evidence that nearly 40 per cent of their consumer correspondence fails to meet regulatory requirements.

Absolute beginnings

After months of consultation, the Investment Management Association has started an absolute return sector for funds that target positive returns in all market conditions. It initially comprises 17 funds, of which five are UK-based.

The bigger picture

Whether you are a private investor, an IFA or a fund manager, there appear to be few, if any, obvious investment choices at present.

UK: mid-year review and outlook

By Mark Martin, manager of the Neptune UK Mid Cap Fund, and Scott MacLennan, manager of the Neptune UK Opportunities Fund H1 2014• Equity markets continued to show strength: despite a strong rally in 2013 driven by a market-wide re-rating, equity markets continued to generate positive returns for investors. Economic activity continued to be stimulated […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment