F&C Management in London has been incrementally increasing a slightly underweight position in industrial and other corporate bonds in the U.K., given economic uncertainty and anticipated interest rate rises. "In the last four months we have moved from a more neutral position to one where we are slightly underweight industrial and other corporate bonds, and utilities," said Peter Harvey, head of U.K. credit.
Harvey favors supranationals and other quasi-government bonds, which are overweight in the portfolio. He has significant positions in bonds of the European Investment Bank and KfW Bankengruppe, and holds U.K. gilts for liquidity.
Harvey is responsible for £800 million in sterling investments across asset-backed securities, quasi-governments, financials, industrials and other corporates, and utilities. The flagship £130 million Sterling Corporate Bond Fund is benchmarked against the Merrill Lynch Non-Government Over 10-year Index, which has an 18% weighting in ABS, 23% in quasi-governments, 34% in financials, 15% in industrials and other corporates and 10% in utilities.
Neither high-yield nor emerging market debt is in the benchmark, but the portfolio holds these instruments in small size on a duration adjusted basis. The duration of the portfolio is neutral the benchmark, at 11 years.
