…sector positioning will drive returns. Getting this right he feels will deliver double digit returns over the medium term…
In this update we spoke to James Tomlins. James is the co-manager of the Global High Yield Bond Fund and Manager of the Global Floating Rate High Yield Bond Fund. The High Yield Bond Fund was launched in October 1998 and Floating Rate High Yield Bond Fund in September 2014. James has 10 years working with high yield bonds and 5 years’ experience with M&G.
There is a lot of uncertainty in the bond market and in particular high yield and this makes investors nervous. There are two factors, firstly interest rates and how in a rising environment bond funds could return negatively, and secondly especially with high yield a creeping default rate. Despite these concerns investors continue to turn to bonds because of the low volatility compared to equities.
We started by talking about the market today. James explained that at the start of the year the markets were very volatile with big falls and then in mid-February there was a big snap back driven by the oil price rally and QE. What has been clear is that calling the right sector has been really important. Some might argue that holding energy stocks would have benefited investors especially with the snap back came however the sector is still down 20% over twelve months, so even with the rise it hasn’t captured all the loses.