Don't ignore strategic bonds, says Defaqto research
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Strategic bond funds should not be ignored by advisers just because the portfolios had a relatively poor run over 2011, according to research by Defaqto.
The independent financial research company notes the strategic bond sector had a “difficult” time last year when compared with other fixed-income spaces.
Data compiled by Lipper shows the £ Strategic Bond sector returned 3.6% over 2011. Although this is ahead of most other spaces, it is below the returns shown by the UK Index Linked Gilts, UK Gilt and £ Corporate Bond sectors.
Defaqto’s research suggests this performance can be attributed in part by the ongoing eurozone debt crisis and the resultant run for safe havens such as gilts, rather than poor management of strategic bond funds.
In addition, the study notes that half of the funds in the IMA £ Strategic Bond sector managed to produce positive returns during 2011 and the sector as a whole avoided losing money. (article continues below)
The paper concludes advisers should not avoid the “potential benefits” of strategic bond funds, arguing they allow investors to access the vast bond universe.
Adrian Gaspar, senior consultant at Defaqto, says: “Recent market turmoil has highlighted the significant divergence in performance of the various types of bonds but it also suggests that opportunities exist to buy good quality issues at relatively low prices.
“Outsourcing some, or all, of the responsibility for identifying these opportunities to a manager with significant expertise and resource should save advisers time and also help them deliver outcomes in line with their clients’ expectations.”
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