Hayes cuts Axa Sterling Corporate Bond duration
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The new lead manager on Axa’s Sterling Corporate Bond fund has shortened duration in the portfolio to reflect a more cautiously optimistic outlook.
Nick Hayes, who took over at the helm of the Sterling Corporate Bond fund from Theo Zemek on December 1, has reduced duration to six-and-a-half-years by selling longer-dated bonds and futures.
The portfolio has historically been run with a duration of seven-and-half to eight years.
“Due to the fear of Europe imploding, government bonds rallied in 2011, with the yield on UK 10-year gilts down to below 2% at the end of 2011 from 3.5% at the start of the year,” Hayes says.
“But the world is not in as bad a situation as portrayed. The US, emerging markets and Europe are doing better than expected. Europe is being brought closer together rather than breaking up. People are realising that there is not one silver bullet but a solution over time.”
Hayes says the move to shorten duration has so far served the portfolio well.
“Gilt yields are a small bit higher now than at the start of the year, up from 1.97% to 2.1%, so shorter duration has been the right strategy.”
“If gilts rally the same this year as they did last year then we will end up with a 40 basis point yield on the 10-year gilt - even Japan 10-year paper is yielding 1%,” Hayes adds.
The £132m fund is up 5.7% over one year according to Morningstar.
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