Within fixed income, Summers still likes credit even though spreads have narrowed significantly in recent months. He believes it is important to look globally, but also to be discerning about the credit managers used. Credit selection is vitally important at a time when corporate bonds are more expensive.
The macroeconomic environment is still supportive for credit, he says, and credit fundamentals are still in tact. The coupon remains attractive to income-starved investors and as a result, the group has exposure both to emerging market debt and high yield.
He also uses other, more esoteric options in fixed income, mostly within investment trust structures. These include funds from groups such as TwentyFour, Sequoia and GCP; it also holds a UK-based mortgage-backed securities fund.
Summers prefers an investment trust structure, and says: “These are owning relatively illiquid credit instruments. As long as people can hold it to maturity, in a closed ended vehicle, they get their money back and coupon. We don’t want to be in an open-ended fund for these, where the manager might be forced to sell.”
He adds: “As with all investment managers, the hunt for yield has become vitally important for us in recent years. Credit and particularly unusual types of credit are a good source of this. Property and infrastructure are also very appealing. These give decent levels of income without the same level of risk as seen in equities.”
In selecting investments, the group has specific equity, bonds and collectives teams. Summers is responsible for fund research, leading a team of six whose full-time job is researching retail funds and investment trusts.
