So, I was initially a little perplexed by the fact that both Nordea and Hermes chose to launch funds this week.
Granted, neither fund is focused on the sovereign market where most of the recent action has taken place and, in fairness to Hermes, its fund is an absolute return credit fund, but the point stands – Is now really a good time to be launching a bond fund?
The answer, it would seem, is yes, as long as it is the right type of fund.
Ian Winship, portfolio manager in the BlackRock global unconstrained fixed income team told Portfolio Adviser the old way of investing in fixed income was to have three or four strong conviction views or trades.
But, as he points out, that is fine if you get it right, but with liquidity tighter than it has been in the past, in large part because of a shrinking of bank trading desks, and the general increase in volatility, there is a strong possibility that it could go really wrong.
“What you have to do is now have a lot more trades, a lot more teams available,” he said, “getting your money in is not the problem, you have to be able to get the money out and, to do that, you have to be thinking about more trades.”
Roger Webb co-manager of the Aberdeen Strategic Bond Fund agrees. Speaking to journalists last week he said single asset class funds are inappropriate for the level of volatility to come.
“The ability to be flexible, to not be tied to a benchmark is crucial, as is the ability to hedge duration risk,” he said, adding: “It is also important to be adequately aware of liquidity. It is very apparent that the FCA is very keen for us to stress that liquidity is poor and needs to be managed.”
