FUND SELECTOR HIGH YIELD BONDS
Top ranked funds Assets under management
FUND ANALYSIS
� The SWIP High Yield Bond Fund is managed by Steven Logan
and also Kevin Mathews, who joined the company in April 2011.
� While the fund is of considerable size, the portfolio spans more
than 400 stocks. Around half the fund is allocated to the US,
with the rest in euro and sterling-denominated investments.
� Launched in 2000, the emerging markets-biased Thames River
High Income Fund follows a largely value-driven strategy, based
on bottom-up analytical research combined with macro inputs.
As a guide, co-managers Stephen Drew and Mehrdad Noorani
will invest around 75% in corporates and 25% in financials/
sovereigns.
� BlackRock’s Global High Yield vehicle currently has a bias towards
the US which makes up almost two-thirds of the portfolio. Its latest
annualised yield is around 6%.
FUND PICKER’S COMMENT
LEE ROBERTSON, CEO,
INVESTMENT QUORUM
The Threadneedle High
Yield Bond Fund, managed
by Barrie Whitman
and Michael Poole, aims to
achieve a higher level of
income which is paid
monthly. Investing principally
in higher risk UK and
international fixed interest
securities it may also invest
in equities. It has suffered
slightly recently with higher-than-normal
cash holdings,
but we remain comfortable
with this due to
the difficulties in balancing
risk and reward.
The current make-up of
the fund is 57% in developed
Europe [ex UK], 22%
UK and 7% North America
with the balance in regions
covering the Middle East,
Africa, emerging Europe,
Latin America and developed
Asia.
In terms of sector
weightings, the largest
positions are 18% industrials,
17% financials, 13%
consumer services, 12%
consumer goods and 10%
telecommunications. The
fund currently has a yield
of around 8%, which is the
level many investors are
seeking while being prepared
to take the extra
associated risk.
The Standard Life Higher
Income Fund is another
large fund with some
£540m under management,
aiming to provide a high
level of income with some
capital growth if possible.
Managed by Arthur Milson
and Erland Lochen, the
fund continues to deliver
solid performance by investing
in high yielding sterling-
and euro-denominat-
Top 10 high yield bond funds by assets under management
To 17 Nov ’11. Bid to bid, £, gross income, no cap. Source: Morningstar
Top funds by AUM – 3-year risk/return
Top 3 performing funds vs indices
-300
SWIP High Yield Bd A Inc
Nov ’08 May ’09 Nov May ’10
To 17 Nov’11. Source: Morningstar
ed sub-investment grade
corporate bonds to take
advantage of the significantly
higher income available
than would be available
through government
debt. It has large holdings
in industrials, consumer
services and telecoms, the
usual suspects in this type
of investment media.
The M&G High Yield
Corporate Bond Fund is
another fund which continues
to do well.
Managed by Stefan
Isaacs and James Tomlins
this large fund (over £1bn)
shows good performance
over most periods and
aims to maximise total
return, the combination of
income and capital growth,
while delivering a sustainable
level of income for
investors.
While it has taken some
short-term pain because of
the eurozone crisis, the
higher yielding corporate
debt instruments used are
delivering a high yield and
the lower-than-expected
default rate should contribute
to capital growth in the
medium term. To further
stabilise the fund, transferable
securities such as cash
and near cash are available
to the manager.
30 PORTFOLIO ADVISER [www.portfolio-adviser.com] JANUARY 2012
Return (%)
855
700
L&G High Income Trust R Inc
Sector average
555
SWIP High Yield Bd A Inc
BlueBay High Yld
Bond Dis DR £
400
Standard Life
Higher Inc R Acc
M&G High Yield
Corporate Bond X Inc
255
Thames River High Income £
2
2.5 3
Standard deviation (%)
3.5 4
To 17 Nov’11. Source: Morningstar
1500
1200
900
L&G High Inc
% 600
Trust R Inc
3-year 3-year 3-year 3-year 3-year Morningstar Fund Domicile
% chg Alpha Beta R² volatility Rating size (£m)
BlueBay High Yield Bond Dis DR £ 54.62 -0.03 0.58 0.82 3.07 �� 1,844.86 Luxembourg
L&G High Income Trust R Inc 52.6 0.1 0.49 0.73 2.74 ��� 1,650.42 UK
SWIP High Yield Bond A Inc 50.02 0.02 0.52 0.73 2.94 � 1,240.7 UK
M&G High Yield Corporate Bond X Inc 46.81 -0.12 0.53 0.75 2.96 ��� 1,108.41 UK
Threadneedle High Yield Bond Ret Net 66.26 0.1 0.59 0.81 3.16 ���� 722.77 UK
BGF Global High Yield Bd D2 £ Hedge Acc 64.81 0.29 0.55 0.68 3.21 �� 701.72 Luxembourg
Thames River High Income £ 29.9 -0.02 0.35 0.69 2.03 � 579.38 Ireland
Standard Life Higher Income R Acc 43.72 -0.19 0.53 0.74 2.96 �� 540.66 UK
Kames UK High Yield Bond A Inc 81.49 0.23 0.66 0.82 3.49 ���� 477.28 UK
Axa US Short Duration High Yld I Gross Acc N/A N/A N/A N/A N/A – 450.61 UK
300
0
Kames UK High Yield Bond A Inc
Threadneedle High
Yield Bond Ret Net
BofAML £ HY
BlueBay High Yld
Bond Dis DR £
BGF Global High Yield
Bond D2 £ Hedge Acc
Nov
GIF SB £ High
Yield Bond
May ’11
Nov
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