Aviva Investors’ head of multi-asset retail funds Peter Fitzgerald has been allocating to high-yield bonds and loans in his £162m Aviva Investors Multimanager 20-60% fund while reducing exposure to global inflation-linked debt.
Fitzgerald has recently returned to Philip Milburn and Melanie Mitchell’s £1.5bn Kames High Yield Bond fund, initiating a 3 per cent position after selling the fund on valuation concerns earlier in the year.
He says: “We don’t think high yield is cheap but, relative to other fixed-income options, it’s the least worst.”
Fitzgerald has also started a similar-size position in Dan Gardner’s £1.6bn M&G European Loan fund, which invests in leveraged loans and senior secured floating-rate notes. This fund complements an existing holding in Shaheer Guirguis’s £1.3bn Insight Libor Plus, which invests in asset-backed securities and corporate floating-rate notes.
The purchase of both holdings was funded by a reduction in Aviva Investors Multimanager 20-60%’s top holding, Mihir Worah’s £415m Pimco GIS Global Advantage Real Return fund, which focuses on global inflation-linked bonds.
Fitzgerald says: “We still think it’s a useful position to maintain but we believe it’s better to reduce the size and allocate to high yield and loans.”
Bestinvest senior research analyst Rob Harley says: “The broader index-linked bond market is sensitive to rises in real yields and if yield curves normalise, there is a risk that this process might continue.
“In contrast, high-yield bonds and loans are less sensitive to a rise in the yield curve. ”