Axa’s Hayes: Bond fund liquidity – content more important than size

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Axa bond manager Nick Hayes

Axa Investment Managers fund manager Nick Hayes has warned that liquidity problems can affect smaller bond funds as well as large ones.

Hayes, who manages the £166m AXA Sterling Corporate Bond fund and the £137m AXA Sterling Strategic Bond fund, says bond fund managers should focus on what is in their funds, not their size.

Hayes’ comments follow those of BlackRock head of UK retail sales Jeremy Roberts who told Fundweb earlier this week that fixed income funds needed to be smaller and more nimble in order to succeed.

Roberts says: “In the world we find ourselves in, with low rates and low yields, the traditional approach to fixed income is not going to work as it has done in the past few decades. You need to be flexible. The size of funds is something we are extremely careful about.

However, Hayes counters: “Size is not the most important thing, content is more important. For instance, gilts are very liquid while other types other types of debt are not. It is important to have a mixture.”

In terms of Hayes’s own portfolio, the summer volatility from Federal Reserve chairman Ben Bernanke’s talk of tapering caused a shift from emerging market debt and a reduction in duration.

Hayes says: “We reduced [duration] in May and June, increased it in July and we are now reducing it again due to the current uncertainty. It was five years, now it is three.

“More recently we increased our exposure to developed market high yield debt, we could pick it up for 7 per cent. We will not be going back to emerging market debt any time soon.”