By Robert Stock Ian Dickson is to reduce his 8% cash weighting in the Henderson Preference & Bond F...
By Robert Stock
Ian Dickson is to reduce his 8% cash weighting in the Henderson Preference & Bond Fund over a period of months with much of it likely to go into corporate paper.
Dickson, who has run the fund since 1981, has held the cash position as a buffer to concerns about the preference share market, which is beset with liquidity problems. It also reflects Dickson's belief that yields were not making headway in a climate of rising interest rates.
The change comes as Henderson Investors is making moves to expand its credit market team to cope with increased business and the rapid expansion and change of the credit market.
On 30 June 1999 Henderson had £12,793m of retail and institutional fixed interest assets under management. On 30 June 2000 that had grown to £21,285m. According to Standard & Poor's, the flagship frAAA-rated Henderson Preference and Bond unit trust, run by Dickson, has grown from £51.10m on 19 May 1997 to just over £251m on 23 August 2000.
Investment Week understands that the Henderson credit desk team could add two new members to the current team of four managers which includes Dickson, Dominic Powell, Mhairi Mackelworth and John Pattullo.
Dickson, who also manages the Henderson Global Bond, and the offshore HF Global Bond and HF Sterling Bond SICAVs, acknowledged that an expanded team was needed to cover the increasingly wide fixed interest and bond markets.
He said: "We realise that the growth and increased diversity of the credit market have been such that you need more people to cover it effectively."
The Preference & Bond Fund is ranked 10 out of 27 funds in the Standard & Poor's UK Other Bond sector on three-month performance to 23 August, with capital returns of 1.7%, on a bid to bid basis. It is ranked 14 of 17 over the 12 months to that point with negative capital returns of 4.2% and third of seven funds over three years with returns of 25%. It has the lowest volatility of any fund in its sector.
The assets of the fund are split between 16% in preference shares, a position that has been reduced from 90% in 1995 through a process of non-purchase rather than sale, 61% in corporate bonds, 15% in convertibles, and 8% in cash. Around 10% of the fund is held in sub-investment grade paper.
Dickson said: "I was keeping a cash weighting as a buffer to offset the difficulties in the preference market, and because interest rates have been rising and it seemed to me it might be difficult for yields to make much headway. The next move is to get the cash down to 3-4%."
Dickson said the corporate bond market has been suffering from oversupply, particularly in the light of debt issuance by telecommunications companies rushing to invest in technology upgrades.
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