Glasgow Investment Managers, which manages £100 million in fixed-income assets, is focusing on bonds just below investment grade to pick up yield in a market where corporate bond spreads have tightened significantly over the past months.
Iain Lynn, investment manager, says, "There is not a lot of value in investment-grade bonds right now. Investors looking for yield have been buying and pushing yields down." However he does see good value outside the investment-grade universe, especially in triple-Bs.
Lynn says he has been looking at bonds yielding 7- to 8%. And, while bonds are still offering a reasonable element of risk, Lynn says he is looking at credits on a case-by-case basis, looking for evidence companies are paying down debt and recovering. He also expects to see an upturn in new issuance as companies that had been avoided the capital markets return. "Once we get into September, the (bond) printing press will pick up," says Lynn.
Recently, Lynn has bought Luxfer Holdings, which makes aluminum auto parts, and is building up a holding in The Big Food Group, which owns the Iceland grocery store chain in the U.K. and yields over 10%. Glasgow Investment Managers does not use a benchmark index and allocates 70% to corporate bonds and 30% to governments.
