Kames High Yield bond fund kicked off Wealth 150

The £1.7bn Kames High Yield Bond fund has been removed from the Hargreaves Lansdown Wealth 150 amid concerns the managers will find it increasingly difficult to add value going forward.

Hargreaves Lansdown argues that with the UK high yield bond market being relatively small, most high yield bonds will invest a large portion of their assets in European and US high yield bonds. 

However with spreads between yields on risky high yield bonds and less risky government bonds at narrow levels, Hargreaves Lansdown says investors receive little additional reward for the “significantly” higher risk of owning bonds issued by less financially secure companies.

Co-managed by Philip Milburn and Claire McGuckin, the fund has delivered first quartile cumulative performance over a five year period to 14 August. During this timeframe the fund produced a return of 69.59 per cent while the IMA Sterling High Yield sector produced a return of 57.39 per cent. 

Hargreaves Lansdown senior analyst Laith Khalaf says: “While we continue to believe the Kames High Yield Bond fund is managed by a high calibre team, it will be increasingly difficult for them, and other high yield bond fund managers, to add value for investors in the prevailing environment.

“In addition, it is worth noting that in a world where the cost of investing has fallen for many funds, this fund’s annual charge is high compared to similar funds. This will make it even harder for the managers to outperform, after considering the effect of fees.”

A spokesman for Kames Capital says: “Whilst obviously we are disappointed to be removed from Hargreaves Lansdown’s Wealth 150, we believe the multi-award winning fund remains competitively priced and is still one of the stand out funds in its sector. This is demonstrated by its excellent and consistent performance over all time frames.”