Baillie Gifford Strategic Bond Fund B Income
Rated Fund 2013-2018. Buys both investment grade and high yield bonds
Baillie Gifford Strategic Bond has not performed as strongly as other Rated Funds, but a high allocation to investment grade bonds accounts for this. A past winner of Money Observer's Best Smaller Sterling Bond Fund award, it is attractive to income seekers because it pays a monthly income and has a competitive yield of 3.5 per cent.
Unlike other managers in the strategic bond sector, Stephen Rodger and Torcail Stewart aim to add value almost exclusively through their stock-picking prowess and do not aggressively manage the interest rate exposure or distribution between different credit quality bonds. The portfolio is split 70/30 between investment grade and high-yield bonds. Rodger and Stewart point out that past experience shows this to be the optimal positioning to reduce risk and maximise returns.
They look at three factors -- the macroeconomic situation, bond valuations and company-specific risk and return considerations. Macroeconomic concerns can throw up attractive valuations, when bonds across a sector are downgraded even though underlying companies are sound. Their aim is to exploit these inefficiencies in the market.
Though they tend to be rather contrarian, going against market consensus, the managers only buy bonds issued by companies that they believe are resilient, with stable or improving financial characteristics. They also need to be convinced that there is an identifiable catalyst that will trigger a market revaluation. They only invest in bonds in which they have a strong conviction, so the portfolio is relatively concentrated, with typically 60 to 80 holdings.
FundCalibre, the fund ratings and research provider, rates this as an 'Elite' fund on the strength of the managers' expertise and 'excellent' performance.
Narrative and ratings content all as of 01 January 2018.See all Money Observer rated funds
Lesley Dunn - graduated from Strathclyde University with a BSc (Hons) in Maths, Statistics & Economics in 2000. She worked for Scottish Widows Investment Partnership for 15 years, initially in the investment grade team before moving to manage the company’s high yield portfolios. Lesley is an Investment Manager in the High Yield Team & is a CFA Charterholder.
Torcail graduated BA in Geography from the University of Cambridge in 2002 and M.Phil in Management, Economics and International Relations from the University of St Andrews in 2005. From 2006 to 2008 he worked as an Investment Analyst for the Alliance Trust’s UK Large Cap equity fund. Torcail is a member of the UK Society of Investment Professionals (UKSIP). He joined Baillie Gifford in 2008 and is an Investment Manager in the Credit Team.
Stephen graduated BSc (Hons) in Management Science from the University of St Andrews in 1990 and an MSc in Accounting and Finance from the London School of Economics in 1994. He joined Baillie Gifford in 2000 and is Head of the Credit Team. Stephen became a Partner in 2008.
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