MAM Funds is diversifying bond exposure within its Midas balanced growth fund through an institutional fund that invests in countries and companies that have the greatest ability to repay their debts.
The wealthy nations bond fund, managed by EFG Asset Management with Stratton Street Capital as sub-advisor, invests only in investment-grade bonds, as its management team believes that investing below this part of the bond market will expose investors to the highest levels of default for decades.
The net foreign asset position of a country forms a major part of its analysis prior to the team’s asset allocation decisions. The NFA position of a country is the value of the assets it owns abroad, minus the value of the domestic assets owned by foreigners. This provides an indication of how indebted that country is and MAM Funds says that looking at the world in this way inspired it to buy the Nordea Norwegian bond fund.
Fund manager Simon Callow is worried about exposure to sterling. He and co-manager Mark Wright felt that exposure to currencies of healthy regions, including the Norwegian krone and Singapore dollar, would provide diversification.
Callow and Wright have also replaced a holding in M&G’s optimal income fund with the more defensive M&G global macro bond. Callow says that, at more than £5bn, M&G optimal income is big and a tactical switch was made to a smaller fund.
Callow says: “M&G optimal income does not switch between asset classes because of its size. It is a nice fund but the macro fund is smaller and more nimble.”