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Performance review: Close Bros swaps bonds for equities

by Eleanor Lawrie on Jul 11, 2014 at 11:32

Performance review: Close Bros swaps bonds for equities

Close Brothers Asset Management’s (CBAM) Nancy Curtin (pictured) says the use of equities as a bond proxy is the only way to meet clients’ income requirements.

Curtin, chief investment officer at CBAM, said the firm has adapted to the new world order, in which companies are paying out increasing dividends and central governments are stifling bond yields with monetary easing.

This has prompted her team to re-examine their private client medium risk portfolios, in some cases reversing the 60-70% allocation to bonds to the same in equities.

‘We are running a broad mix of portfolios, some with a growth mandate and some with an income mandate,’ she said. ‘Before this policy change I would have solved growth with equity and income with bonds, and now we are using equities for both.

Curtin stressed, however, that a client’s individual appetite to risk is always taken into consideration.

‘For many of our clients, who might have had 60% bonds and 40% equity 10 years ago and who need income, we tell them we can’t pay out that income from government bonds and it comes at a time when companies are paying more in dividends,’ she said.

Curtin added the overweight to equities could increase further if earnings come through in the summer, following a disappointing first quarter.

The volatility caused by this, alongside problems caused by poor weather in the US and weak data out of China. heralded a ‘healthy and much needed correction’, she said.

‘We have had such a funny year. In January and February, things that performed well last year continued to perform well. In March and April, the market hit a wall and there was a massive rotation into both utility and energy companies, which tend to have a good dividend yield and be quite defensive,’ she said.

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