Citywire for Financial Professionals
Stay connected:

View the article online at

Spreadbury on the defensive with 'safe haven' corporate bonds

Bonds secured against physical assets offer protection against liquidity risk, says Ian Spreadbury, manager of the Fidelity Moneybuilder Income fund.

Spreadbury on the defensive with 'safe haven' corporate bonds

High-quality corporate bonds provide a safe haven for investors' cash and also offer value in the current volatile backdrop, according to Ian Spreadbury, manager of the Fidelity Moneybuilder Income fund.

Spreadbury is wary of liquidity risk in such an environment, so remains in relatively defensive mode, with 17% of the £3.5 billion fund invested in safe-haven assets such as government bonds, cash and supranationals. A further 19% of the fund, which features in Citywire Selection, is held in utilities.

Physically backed assets

With his top three positions in UK gilts, much of the remainder is in bonds secured against physical assets.

'I want to be quite liquid in this environment and it is also a reflection of the risks to growth which I think have increased in recent months. Most of my utilities are regulated so the level of safety is quite good,' he said.

Further protection comes from having 12% of the fund in asset-backed securities across a diverse range of sectors, all at senior levels of debt. Spreadbury cites the Trafford Centre retail park as a prime example.

'The bonds we own here are senior in the structure and secured on the development. The quality is extremely high.'

Credit exposure trimmed

Spreadbury has also been trimming his credit exposure and using the proceeds to take advantage of opportunities gilts when they have presented themselves. He believes 10-year gilt yields could fall below 1%, but that it would for a limited period of time.

'In the near term the problems in the eurozone could cause gilt yields to grind lower, but at these levels I see limited price upside over a longer time frame. It is possible yields could go below 1% on 10-year gilts, but I think they are unlikely to stay there for a meaningful period of time.

'Gilt yields are the lowest in over 100 years and probably the lowest ever, so this is a reflection of this extraordinary economic environment where the private sector is deleveraging and conventional monetary policy is not working.'

Financials underweight remains

Spreadbury continues to be underweight financials and those bonds that he does hold are generally short duration. Some 11% of the portfolio is in banks, with 5% of that covered.

'I don’t think it makes sense [to have too much in] such a volatile sector, which is tied up with sovereign credit quality.

'These covered bonds are secured by mortgages with a high level of coverage so that the safety level is very high. Nearly half my banks exposure is in secured bonds.'

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts

In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

More about this:

Look up the funds

  • Fidelity Moneybuilder Income
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Ian Spreadbury
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us


Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add to your safe senders list so we don't get junked.

Sorry, this link is not
quite ready yet