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Kames' $50bn bond boss: my yield curve taper trades
by David Campbell on Apr 10, 2014 at 13:52
‘There remains a lot of danger in fixed income beta – rates are almost certain to rise over 12 months and high yield remains at all-time highs. But there are a lot of opportunities for alpha as well.’
He highlighted hard currency emerging market debt, which has almost erased the losses booked at the beginning of the year, as a useful example of both the dangers and opportunities.
‘Emerging debt, particularly local currency, is what I describe as great to buy but hard to sell. Everyone either wants to be in it or out of it, its either feast or famine,’ he said.
‘So when people are asking for their money back from strategy specific mandates and [managers] are having to sell what they can rather than what they would like to, we are able to pick that up. The same thing happens in investment grade funds: when high yield sells off, they will reach down and buy it on the margin.’
The Kames Strategic Bond fund has ventured back into emerging debt hard currency issues but is not aggressively mining for yield, buying Colombian-exposed oil extractor Pacific Rubiales on a yield of 6% and others at around 4.5%.
The fund continues to avoid local currency, however.
‘Am I surprised by how fast [emerging market debt] has come back? Yes and no,’ Roberts said. ‘In relative terms, all other asset classes remain near their highs, so a 10% sell-off in emerging market debt makes it comparatively attractive. It’s the equivalent of a 20% sell-off 20 years ago.’
Over the last five years, Roberts has returned 95.39% versus an average Strategic Bond sector manager return of 76.42%.
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on Jul 31, 2014 at 10:36