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OPM ups financial bond exposure

OPM Fund Management’s multi-manager team has increased its fixed-interest fund’s exposure to financial bonds because bank debt looks attractive.

The company believes the high yields available from financial bonds justify the risk. Fund manager Tony Yousefian says the risk of a big financial institution going bust has been minimised and that banks are rapidly repairing their balance sheets.

Lloyds is starting to pay back the cash injection it received from the Government and Barclays is taking cash out of its business through the sale of Barclays Global Investors.

Yousefian says nobody wanted to deal in bank debt six to nine months ago. There were plenty of sellers but no buyers, but now this has reversed, with lots of buyers and no willing sellers.

Some bond funds have attracted huge volumes of new money but Yousefian is wary of these as he feels they are unlikely to gain enough exposure to the higher yields available from bonds on the secondary market. If the bigger bond funds have to invest in new, lower-yielding bond issues because there is not enough capacity in the secondary market, fund performance could be hit.

OPM prefers smaller, nimble funds to gain financial bond exposure. It has reduced its weighting to the M&G corporate bond fund to top up its holding in the smaller Artemis strategic bond, which invests in many companies that are thought of as too big to fail.

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