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View the article online at http://citywire.co.uk/wealth-manager/article/a529863

Paul Read: 'We had the wrong portfolio for Q3 but there’s value ahead'

by Emma Dunkley on Oct 05, 2011 at 10:57

Paul Read: 'We had the wrong portfolio for Q3 but there’s value ahead'

Invesco Perpetual’s co-head of fixed income Paul Read said his portfolios have been hit in the third quarter by his exposure to bank debt and financials, but he believes these positions will pay off in the long term.

The manager of the Citywire Selection Corporate Bond and Monthly High Income Plus funds conceded he had the ‘wrong’ portfolio in the third quarter, although this was not solely due to his positions in bank debt and financials, and was also a cause of not having exposure to more safe-haven assets.

Read said: ‘We’re still very confident in investment case for bank debt and financials, but we’ve had poor performance in Q3 – it’s a Q3 issue though, across our portfolios.

‘We had the wrong portfolios for the third quarter – but this was not just in financials and banks, it’s about having risk in a market that was the worst quarter for risk in a decade.

He said the poor performance 'was also due to not having exposure to risk free assets such as gilts and treasuries that have been rallying in Q3. This made for portfolios that didn’t perform.'

However, he added: ‘From here we are confident about our portfolios – we would not want to de-risk in this market environment. There is tremendous value in high yield and little in government bonds.’

However, the manager conceded there remains considerable uncertainty around banks and financials at the moment.

‘Q3 would’ve been better to have more gilts and less risk, but this is not how we manage money.’

Read also has significant exposure to French and UK banks in some of his portfolios. In September S&P downgraded the Corporate Bond fund's triple A rating down to double A, over concerns surrounding liquidity and because the £5.7 billion fund had around £1 billion of exposure to French and UK banks.

Read said he did not see the S&P downgrade of his Corporate Bond fund as entirely negative, although he found their comments on liquidity surprising.

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