Followers of the Income Growth portfolio will be keen to learn that the Axa US Short Duration High Yield Bond fund has been sold in favour of the Standard Life Global Index Bond fund.

Tony Yarrow of Wise Investments, who took over the portfolio from Daniel Lockyer, has discovered that the Axa fund now has a very high minimum investment requirement and he has decided to increase exposure to index-linked fixed income funds.

The portfolio also holds the M&G UK Inflation Linked Corporate Bond fund. Yarrow reckons that ‘high yield looks overvalued and is also correlated with equities, which are a large part of the portfolio anyway’.

Given the low income yield on the Axa fund, the replacement with an index-linked fund won’t alter the yield of the portfolio materially.  

He adds: ‘The Standard Life fund offers access to global inflation-linked fixed income securities. These provide diversification away from equities and UK corporates and will perform well (particularly in a relative sense) should moderate to high inflation become a reality globally. International fixed income also offers a yield premium to Western government debt.’

The switch has been enacted and the portfolio can be viewed at http://www.moneyobserver.com/portfolio/income-growth-portfolio