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Old Mutual’s Snowden hits back at the bond bashers

Old Mutual corporate bond fund manager Stephen Snowden has hit back at equity fund managers who have been claiming that fixed interest is overvalued and set to underperform.

At a recent FundsNetwork conference, Schroder UK mid- 250 manager Andy Brough and Jupiter income manager Tony Nutt both said bonds are likely to deliver negative or minuscule returns for the foreseeable future.

Snowden, the top-performing corporate bond fund manager over the past year, insists that the asset class is not over-valued on a 100-year view. He says bonds are paying a yield in line with the long-term trend rate and that value is added by stockpicking bond managers rather than asset allocation.

Snowden says the effect of the 2004 Pensions Act and December’s coupon payments provide a positive backdrop for bonds and adds that good bond managers will always be able to find value in the market.

Snowden is aggressively overweight in nursing home bonds and property debentures which make up 20 per cent of his portfolio but only comprise a negligible portion of the index.

He says: “People talking down the bond market need to look at it in context. Commercial property and equities are both also yielding less than they were. The way that I make my money is through stockpicking and the views of others in the industry will not make a difference to how I run the money.”

Clancy’s Financial Planning director Jim Clancy says: “If bonds are overvalued, then IFAs are going to win through their asset allocation to equities. But while bond markets have been a bit nervous, it is about stock-picking at the end of the day.”

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