Clients will be intensifying their search for income in 2009 with investment grade bonds proving particularly attractive, according to Justin Oliver, co-manager of the Collins Stewart multi-manager funds.
However, global cuts in interest rates have made it extremely difficult for income investors as their targets can no longer be met by holding cash in the bank or through the purchase of government bonds given the collapse in yields this year, Oliver says.
"Consequently, we can see particular attractions in the investment grade corporate bond space at present - a look at the US for example reveals that investment grade corporate debt is yielding over 8% in amalgam; a bleak economic and investment outlook has already been more than discounted."
The team is accessing investment grade bonds via the M&G Corporate Bond fund and Invesco Sterling Bond fund.
It believes Richard Woolnough at M&G has read the economic situation "fantastically well" and has benefited from his aversion to financial issues.
"Whilst selective purchases in this area were made towards the end of 2008, the fund remains underweight this segment of the market and has instead focused on exceptionally attractive industrials which are offering yields at unprecedented levels," Oliver says.
Meanwhile, the Invesco Sterling Bond fund has maintained a higher weighting to financials and consequently has endured a more difficult year, Oliver comments.
"However, we have high regard for the Henley-based fixed income team and would argue that a combination of these two funds provides an appealing blend in terms of offering a diversified exposure to the corporate bond space," he says.
For growth focused investors, Oliver believes there a number of opportunities with Gold set to be one of the beneficiaries in 2009 after the current deleveraging phase has run its course.
"In this environment, one would expect gold shares to perform particularly well given that this sector of the market is supported by extremely low PE's and deeply oversold momentum."
The multi-manager team is backing the BlackRock Gold and General fund in this space as it is a "proven performer with a high pedigree manager".
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