govett corporate monthly income bond reduces exposure to telecoms and cable companies
Bob Attridge has reduced the risk profile on the Govett Corporate Monthly Income Bond fund over the past month.
Attridge, who joined Govett from Old Mutual in February and took over the fund on 17 April, has turned over 20% of the portfolio.
He has increased exposure to traditional companies with BBB-rated debt within the Dublin-listed portfolio and has cut back on exposure to telecom and cable companies and to higher rated, lower yield bonds.
From launch on 1 August last year to 1 May 2002, on an offer to bid basis, the fund has returned -4.1%, compared to its peer group, offshore global fixed income, which has returned 0.07%, and the UK corporate bond sector, which has returned 2.72%.
Attridge said he will continue to look for steady, unexciting and traditional corporate paper to increase the portfolio's yield incrementally.
He added: 'I am not looking for out-and-out winners. I use gilts as a benchmark and they are typically yielding around 5.25%.
'The yield on corporate bonds is currently around 6.25% to 6.5% and that is the yield we are looking for on the portfolio. Added to this, we are hoping some of the companies we hold have the scope to be re-rated.'
However, Attridge said few upgrades are going through at the moment, with close to 10 downgrades for every upgrade. He added that, as the global economy recovers, this ratio will start to shift the other way.
At present, there are 41 bonds in the portfolio. Attridge said, while he has been cutting these back, he does not want to reduce them too far as the fund will end up losing its diversification. Individual investment grade holdings typically make up 4% of the fund and sub-investment grade holdings average under 2% of assets.
The portfolio was previously managed by Rick Wisantaner, who left Govett to join Rothschilds.
Attridge is responsible for the management of all of Govett's fixed interest portfolios, which includes the onshore Corporate Bond fund and its Jersey-based UK High Income fund. He also takes responsibility for the bond holdings within the group's investment trusts.
While, on the High Income fund, Attridge can not hold anything below BBB, 75%-90% of the bonds will be the same across all the portfolios he manages, as they have similar briefs.
He said: 'The aim now is to provide a decent and secure yield through high quality, low-risk bonds. I want to improve the quality of bonds without sacrificing the yield.
'It is all about capital preservation; if bond yields go up, then prices go down. What I am trying to do is avoid the disasters in which the bond price falls sharply relative to the rest of the market and also stay away from situations where a company defaults on the bond.'
Looking forward, Attridge predicts the UK yield curve will steepen as the Government issues more gilts and in anticipation of higher rates coming through this year.
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