Fidelity is going to follow up its decision to move its bonds team from Surrey to London by boosting...
Fidelity is going to follow up its decision to move its bonds team from Surrey to London by boosting the credit analyst team supporting its fixed income business in order to avoid "credit blow-ups" fund manager Ian Spreadbury says.
He heads Fidelity's MoneyBuilder Income Fund, which already draws on five credit and five quant analysts.
Companies such as WorldCom, Marconi and Cable & Wireless mean there is a growing need to put a strong team of credit analysts in place to avoid credit defaults, Spreadbury says.
Indeed Fidelity estimates taking on board 3 more credit analysts within the next quarter.
Unlike other fixed income fund managers, Fidelity does not take macro bets on interest rates or currencies. Instead Fidelity sees its competitive advantage in its multi-strategy approach which includes yield curve strategy, sector selection and stock bets with no single thread dominating.
Spreadbury says investment grade corporate bonds fit well into portfolios as a source of income and as "great equity diversifiers". Fidelity's research, based on 33 half-yearly periods comparing the FTSE All Share with performance by guilts, high yield and investment grade corporate bonds, suggests the negative correlation between equity values going down corresponding with bond yields rising.
And with the inflation and interest rates coming down from the highs of the '70s and '80s, bonds have become more attractive due to a more favourable rate of income.
Spreadbury says that according to Fidelity's research, bonds have outperformed equities over the last 15 years, even when you include the last two years of volatility in the corporate bond market.
In any case, Spreadbury predicts that there will be less occurrences of "credit blow-ups" as companies, having learned from recent events, move to improve balance sheets.
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