Santander set to slash high yield in favour of 'Cinderella' punts
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Santander fund managers are to halve the heavy overweight in high yield within their multi-manager funds by the end of the year, allocating to
safer investments.
Keith Speck, the head of multi-manager, says the team is cutting exposure to strategic bonds and moving into high quality corporate bonds.
Within Santander’s bond allocation in multi-manager funds, 30% is held in strategic bonds, 45% in corporate bonds and 25% in gilts.
By the end of the year, however, the weighting in strategic bonds is likely to be as low as 15%.
The group manages a total of £1 billion in fixed interest and the in-house view is implemented across all portfolios.
High yield has been successful because of the banks, Speck says, while fears that many British banks would be fully nationalised and subordinated debt would dramatically increase, crushed value.
However, since the banking system started recovering in March, prices have recovered significantly.
“It was a very unusual period which we will probably never see again,” Speck says.
Patrick Smith, a senior investment manager, says for many years bonds have been the “Cinderella” among other investments such as equity, property and commodities.
“They were used mainly to add stability to the portfolio,” he says. “In future there will be very good value within the sector.”
