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How this wealth manager is navigating QE-driven bubbles
by James Phillipps on Oct 10, 2013 at 14:41
In fixed income, Metcalfe is backing strategic bond funds with the flexibility to invest across the asset class spectrum and manage duration.
‘We have not held gilt funds in our medium risk portfolio since September 2011 and the only corporate bond fund we hold is the M&G Short Dated Corporate Bond ,’ he said. ‘This is purely as a result of our inflation fears, together with the high price of gilts and the fact that up to 90% of a corporate bond’s value is linked to the gilt price. The rest of our fixed income allocation is made up of global and strategic bond funds.’
He sold out of M&G’s Optimal Income and Strategic Corporate Bond funds last year, again on concerns about their size. He subsequently bought into smaller rival funds and UK equity and bond income funds.
‘We are not bond purists and have benefited considerably by using both the Artemis High Income fund, which has been the best performing strategic bond in the sector since we introduced it in May 2012 and the Invesco Perpetual Monthly Income Plus fund – both of which having used equities as bond valuations have become more stretched,’ Metcalfe said.
‘We like the pragmatic approach of Artemis’ Adrian Frost, “if I can find better value in the equity than the bond, I will buy the equity”.’
IBoss’s medium risk portfolio has delivered a 29.73% return compared to the IMA Balanced Managed sector average of 27.39% over three years to the end of August. Over 12 months it is up 14.16% versus 13.5% for the peer group.
Metcalfe says fund selection has been a positive driver, barring the odd exception, such as John Wood’s fund over one year on a relative basis.
From a top-down perspective, the early shift out of gilts into global and strategic bond funds was also beneficial.
One opportunity cost was the decision to delay buying into the BlackRock Global Property Securities Equity Tracker fund. Metcalfe has 7% exposure to property currently, split 5% direct and 2% through property shares.
‘We don’t have any evidence of the active funds outperforming in this property scenario and this is the first time that this has been the case,’ he said, adding that IBoss had always previously favoured active management.
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- M&G Global Dividend A GBP Inc
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