“We see ourselves as boring” says manager of newly launched bond fund

Roberts joined Nedgroup, a South African firm, in April 2023, as head of fixed income, having previously worked at Kames and Liontrust. 

Alex Ralph joined in September 2023, having previously worked at Artemis.

But despite that experience and the fact that strategic bond funds have a mandate that permits them to invest in all parts of the market, Roberts said the aim would be to be “dull”, with a below benchmark weighting to high yield bonds, and an aversion to subordinated bank debt.

His view is that the yield available on the bond market in general means “one is not rewarded sufficiently” to own the riskier bonds.

Roberts told FT Adviser that even within the high yield part of his new fund, where the benchmark weighting could be up to 25 per cent, he was likely to have no more than 15 per cent, "and even that 15 per cent would be right at the top end of the high yield universe, that is, bonds with a credit rating of BB". 

The fund will have an average exposure of 15-20 per cent to the government bond universe - the part of the fixed income market usually regarded as having the lowest credit risk. 

Roberts said his aim for the fund was that it would be the “ballast” in the portfolios advisers build for their clients, “leaving them free to take more risk in the other parts of their portfolios”. 

One of the major drivers of performance for Strategic Bond funds in recent years has been duration, in other words, funds that get duration right have outperformed those that have not - almost regardless of the ability of the fund managers to select individual bonds. 

Ballast in a portfolio means an asset ths is lower voaltility and so has the potential to support the overall valuation level of a portfolio even if other asset prices are falling. 

Roberts believes in a world where interest rates are not zero, duration will become a less consequential driver of returns, with bond selection more important.

David.Thorpe@ft.com