High-yield bond funds are suffering from “misperception” amid the current market turmoil, according to guests on the latest FTAdviser podcast.
Ian Brady, Chief Investment Officer at WH Ireland and Sam Dovey, Head of Fund Research at Ravenscroft, join investment journalist Sally Hickey to talk about the funds they invest in, where to find real returns and how they found hybrid operation.
Brady highlighted his positive attitude towards US Treasuries, recommending the iShares 10-Year Treasury ETF, as well as two Chinese funds (Matthew’s China Smaller Companies and iShares China Large Cap ETF).
He added: “One area of the market that we believe suffers from misperception relates to parts of the high yield market.
“As everyone knows, we’ve seen an explosion in spreads to around 190bps and the part we particularly like is the short duration part of high yield.
“The beauty of short-term funds is that by their very nature they self-liquidate. […] Even if rates go up, that means they have the ability to reinvest at higher interest rates.”
He also cited the certainty that some short-duration high-yield bond funds can offer.
Both participants hold the Royal London Short Duration High Yield fund and the Schroders Strategic Credit fund.
Dovey added that there is always feedback to be found.
She said: “Two parties make a deal, as long as you have a solid, repeatable investment process and the investment thesis on the companies you’re buying is still intact…why wouldn’t you buy it ?”