Jupiter Asset Management has lengthened the duration in its £375 million fixed-income portfolio by about a year. John Hamilton, head of fixed-interest funds management, says he is comfortable buying longer dated bonds now that yields have risen a bit.
The portfolio had been quite short for awhile, but Hamilton has recently extended duration from five to six years. "I can buy into longer securities at more attractive yield now," he says. In terms of long-dated gilt yields, Hamilton says they have been in the 4% to 5% range for the past five years and he believes that yield range will continue in the medium term because inflation should be reasonably soft. Jupiter does not use a benchmark index.
Hamilton has also been building up government bond holdings to roughly 15% in gilts because he thinks corporate credit spreads are on the tight side. However, he continues to put cash, which he was building up when yields were low, to work in gilts and corporates now that yields are marginally higher.
On the corporate bond side, Hamilton has been buying some new investment-grade issues, which have tended to be mostly in the single-A and triple-B area. Hamilton declined to name specific issues he has bought.
