View more on these topics

Premier’s Hambidge adds to floating rate debt

David Hambidge

Premier Asset Management director of multi-asset David Hambidge has been adding floating rate debt to two of the firm’s funds to reduce interest rate risk.

Floating rate debt has a variable interest rate and so protects investors from a rise in interest rates.

He has doubled the exposure to floating rate debt in the £116m Premier Multi-Asset Distribution and £22m Premier Monthly Income funds from 5 to 10 per cent this year.

Hambidge says: “Our biggest fear over the long-term is interest rate risk. We do not believe we are getting paid enough in traditional corporate bond funds to take that interest rate risk on. If you buy a traditional corporate bond, you get around seven to eight years interest rate risk. Within our bond portfolios, that figure is three.

“We are getting decent yields on floating rate debt. When interest rates go up, you get a rising return profile, as they are linked to three-month Libor typically. In the meantime, you are going to get a reasonable amount of income.”

Hambidge says the next shock for markets will be growth and that is likely to result in a normalisation of interest rates.

He says: “This is unlikely to be in the next 12 to 18 months, but it is hard to tell. If you are thinking that way, you should position your portfolios for that now.”

Bestinvest senior research analyst Ben Seager-Scott says: “The chance of an interest rate hike in the short-term is unlikely, but given how low they presently are there is only one way they can really go, which will cause a fall in capital values for fixed bonds.”


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm