Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Kames’ Snowden hits out at ‘multi-asset’ corporate bond funds

Kames’ Snowden hits out at ‘multi-asset’ corporate bond funds

Kames’ AA-rated bond manager Stephen Snowden (pictured) has accused other funds in the IMA Corporate Bond sector of switching to a multi-asset approach, to try to improve performance.

‘We run a very plain vanilla investment grade bond fund, which is increasingly rare as liquidity drains away,’ Snowden said.

‘I think some funds have migrated over time to a multi-asset approach, and people bought these funds because they were bond funds.’

Snowden co-manages the £736 million Kames Capital Investment Grade Bond fund with Euan McNeil. It is top quartile in the sector over all time periods since launch in June 2006.

Snowden believes managers and investors have to accept that the asset class will not be popular all the time. ‘I don’t need to be relevant to everybody every day of the week. If fixed income is not popular for five years, it’s not popular for five years, but there will still be money in it.

‘I’m not going to start changing what we do to make it relevant to any market condition. As an asset manager, you have to accept you’re in vogue or you’re not,’ he said.

Furthermore, the strengthening global economy means the nature of the sector is changing, with less divergence between best and worst performers, Snowden argued.

‘Because we are not going to have these huge macro swings in credit spreads, it’s going to be much more about managing individual stock risk. I think there will be a very narrow range between top and bottom quartile, and stock selection will be the main differentiator,’ he said.

The manager also co-runs the £267 million Absolute Return Bond fund alongside Colin Finlayson, which was launched in September 2011.

While the fund is not aimed at investors seeking a yield, it is uncorrelated with other markets. Snowden said the most common question he faces is ‘how will this fund perform in a Lehmans-style meltdown?’

‘We are not going down when everyone else goes down. To my mind, that should be the purpose of an absolute return fund,’ he said.

The fund is currently shorting mining company Anglo-American debt, in favour of a long position in Glencore Xstrata credit, because Snowden feels both have been mispriced by the market.

‘Glencore Xstrata trades cheaper than Anglo American and I think that is wrong. Glencore Xstrata is a bigger, more diversified business than it has been. Anglo American has had problems in South Africa so I think it’s too expensive. Those valuations should flip over.’

He is also pair-trading government bonds, with a long position on bunds and a short on Treasuries, as he feels interest rates won’t rise any time soon in the eurozone, but are set to rise in the US.

Leave a comment!

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

Related Fund Managers

Colin Finlayson
Colin Finlayson
18/18 in Bonds - Absolute Return (Performance over 1 year) Average Total Return: 2.16%
Stephen Snowden
Stephen Snowden
5/60 in Bonds - Sterling Corporate Bond (Performance over 3 years) Average Total Return: 34.24%
Euan McNeil
Euan McNeil
25/60 in Bonds - Sterling Corporate Bond (Performance over 3 years) Average Total Return: 28.99%
Citywire TV
Play Navigating geopolitical risk with ETFs

Navigating geopolitical risk with ETFs

ETFGI’s Deborah Fuhr on how investors can use exchange-traded funds to position their portfolio.

Play Sarasin’s Boucher: why I like salmon with chocolate

Sarasin’s Boucher: why I like salmon with chocolate

Henry Boucher, manager of the £129 million Sarasin Food & Agriculture Opportunities fund, explains why he is gobbling up salmon and chocolate stocks.

Play Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Libby Ashby and leading wealth managers analyse what the Alibaba IPO hype means for Chinese equities, slowing growth of the UK economy and whether there’s anything left to play for in the European sovereign bond market.

Your Business: Cover Star Club

Profile: Barclays' former advisory boss on his move into property

Profile: Barclays' former advisory boss on his move into property

On paper, Rick Denton might have been expected to finish his career in banking

Wealth Manager on Twitter