View more on these topics

Product Matters

Is it possible to make a positive return,

regardless of market conditions? This seems a tricky proposition, particularly when you are investing in the bond market which has a big question mark hanging over it at the moment.

However, UBS has offered a strong case with its absolute return bond fund. It is targeting a return of base rate plus 2.15 per cent but with a volatility that is lower than gilts.

This is partially achieved via a diversified portfolio and it will invest in a range of global fixed-income assets of all classes – government bonds, corporate bonds, mortgage-backed securities, high-yield bonds and emerging market debt, with at least 60 per cent in investment-grade.

Another element differentiates this fund and enables it to pronounce itself absolute return, namely its use of bond futures. Simply put, in a traditional bond fund, interest rate inc-reases are detrimental to the capital value of bonds but in this fund, government bond futures enable UBS to mitigate this risk. By selling government bonds when interest rates are likely to rise, value can be added to the portfolio.

Further value is added by taking a view on currencies. Up to 20 per cent can be exposed to non-sterling currencies to boost performance, with the remainder hedged back to sterling.

UBS has considerable fixed-income resources, with 120 investment professionals on a global basis. This resource plus a team of eight portfolio managers, one from each discipline, helps to construct the fund’s portfolio.

Darius McDermott is managing director of Chelsea Financial Services

Recommended

How to hit the heights

Simple cost-effective data solutions are now available to help IFAs serve the HNW market.

Farrow’s view

Imagine if Madam Tussauds had a gallery dedicated to fund management. Which canny investors would make the podium?

Sharp rise in interest only mortgage deals reports MMD

Interest only mortgage deals have risen steeply on the back of Bank of England base rate rises says broker My Mortgage Direct.Managing director Paul Hearnden says if the pattern of interest only arrangements is replicated with other brokers, there could be a major problem building up for millions of UK mortgage holders if borrowers do […]

Correspondent’s Week

I planned to model my diary for the week on Piers Morgan’s new book but I have to admit this has been a week of failures. I failed to get invited to lunch at Number 10, I don’t have any tales to tell about Princess Diana and I don’t believe that influential businessmen get all […]

Europe: Domestic backdrop & China impact

By Rob Burnett, Head of European Equities In recent weeks equities have been buffeted by two shocks occurring at the same time: China’s devaluation of the renminbi and the prospect of the US Federal Reserve (Fed) raising interest rates. The market is not comfortable with the Fed raising rates at the same time that China […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment