Swip bond managers go for US high yield over Europe

Luke Hickmore 700 x 450
SWIP fund manager Luke Hickmore

Scottish Widows Investment Partnership bond fund managers Roger Webb and Luke Hickmore are preferring US for yield over Europe.

The pair, who co-manage a number of funds including £1.1bn Swip Sterling Credit Advantage fund, believe the US economy is better place for growth.

Hickmore says: “We’ve been slowly building up US high yield exposure. 

“Energy revolution and improving deficit has caused this. They have better chance of coming out of this with growth than Europe does.”

Asked when this maneuver will be completed, Webb says: “The high yield market in Europe gets sub five per cent in yield terms. I would say a level we want to get to is six per cent.

“We expect volatility to persist. We will not see a big sell off.”

In the face of persisting volatility in the markets and valuations becoming “stretched”, the managers have also been working on removing risk from their portfolio. 

Hickmore says: “We talk about taking risk out and that has largely been done with derivatives. Fundamentally high yield feels a bit rich [but] within that space there are are plenty of ideas we can find value.”