SECTOR PROFILE
Bond ,
Rathbone Ethical Bond and TwentyFour Corporate Bond funds . Metcalfe says the L & G Strategic Bond fund was initially introduced into the portfolios at the start of February to broaden the diversification of existing holdings . “ The fund and team have a proven track record of shifting their position to areas of potential future opportunity ,” he says . “ For example , according to FE Analytics , the fund moved from an 11 % position in banks to almost 35 % as of the end of January . “ We believe that managers willing and able to adapt to the prevailing market conditions may be more successful at harvesting market volatility than their peers .”
Apples and oranges But while Metcalfe appreciates a fund manager who is willing to take such punchy bets , others cite this as a potential problem . Eduardo Sánchez , associate research director at Square Mile , says it is difficult to make likefor-like comparisons between the 90 funds in the IA Sterling Strategic Bond sector when there is such a divergence in strategies . “ The only requirement that funds within this sector must adhere to is a minimum weighting of 80 % to sterling-denominated fixed income assets ,” he says . “ However , there is such a wide breadth of issuance that funds within the sector can have completely different exposure profiles .” With no common index against which these funds can be compared , Sánchez says the result is a “ hotchpotch ” bunch of opaque offerings , containing funds that would be more at home in the IA ’ s other fixed income sectors . To address this problem , Square Mile ’ s analysts split the 22 IA Sterling Strategic Bond products they have rated for inclusion in the group ’ s Academy of Funds into four sub-sectors : low risk , medium risk , higher risk and duration risk . Funds in the first two groups contain a mix of investment grade and government debt , some exposure to high yield and emerging market debt , securitised credit , asset-backed securities and inflation-linked bonds . Sánchez says these are likely to make up the traditional defensive component of a fixed income allocation .
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