M&G’s multi-asset managers have added to government bond allocations in several of their portfolios after taking advantage of the recent sell-off in the asset class.
Juan Nevado and Jenny Rodgers took the £940m M&G Episode Growth fund’s allocation to US treasuries up to 5.9 per cent during August, after fears the Federal Reserve would start to taper its $85bn-a-month quantitative easing programme created a buying opportunity.
The fund’s latest update says: “The sell-off in long-dated US government bonds in the first half of the month took them to a yield level that is attractive, relative to cash. Furthermore, they should provide potential diversification benefits should equities experience short-term weakness.”
The move, which took the fund’s allocation to government bonds from 9 per cent to 12 per cent, was funded by selling US equities. The managers still find US stocks “attractively valued”, although this view has been tempered by their recent strong performance.
Nevado and Rodgers also added 3 per cent exposure to 30-year US treasuries in their £319m M&G Episode Balanced fund by selling US equities and using some of the portfolio’s cash. Meanwhile, Steven Andrew added 2 per cent to both 30-year US treasuries and UK gilts after selling stocks in his £163.6m M&G Episode Income fund.
Hargreaves Lansdown senior investment manager Adrian Lowcock says: “If there is one thing uncertainty does is create opportunities and with yields having risen over the summer that is going to make bonds look more attractive than they did.”