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Henderson’s Pattullo and Barnard cut high yield exposure

The high yield allocation in the £1 billion Henderson strategic bond and the £561.1m Henderson preference & bond funds has been cut in recent months, despite both portfolios investing in a new issuance by Fresenius Medical Care.

According to FE Trustnet, 46.3 per cent of the Henderson strategic bond fund was invested in high yield bonds at the end of May but this fell to 39.9 per cent by the close of September. In the Henderson preference & bond portfolio, the allocation to high yield dropped from 45.7 per cent to 36.9 per cent over the same period.

John Pattullo and Jenna Barnard (pictured), the managers of both funds, write in their latest factsheets that they sold a “handful” of high yield bonds over the course of September. The managers also sold bonds from Standard Life, RSA and Investec as they looked expensive compared with the rest of the financial sector.

Pattullo and Barnard revealed that they have been adding hedges to the portfolios to limit the funds’ capital losses in the short term. These measures include the use of credit derivatives and currency positions.

In addition, the factsheets explain that the Henderson strategic bond and the Henderson preference & bond funds invested in the new bond from Fresenius Medical Care, which carried a 6.75 per cent yield at issue.

“This was a significant premium in yield to where existing bonds trade for a seasoned, defensive company and we spent some cash investing in this bond,” the managers wrote.

Fresenius, a German healthcare company specialising in kidney dialysis products and services, last month announced it would sell euro and dollar denominated senior unsecured notes with maturities between three and seven years.

At the start of October, the company confirmed that it had successfully raised €100m through the euro-denominated bonds.

The sale was keenly watched by investors, after issuance in Europe’s high-yield debt market froze due to concerns over the eurozone’s debt crisis and slowing economic growth.


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