U.K. Manager Adds To Old Favorites, Cyclicals
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Solus Funds, which manages £1.5 billion in fixed-income assets, has been adding to its allocations to some of its existing positions as well as buying a few cyclical names.
Kevin Doran, fund manager of the Manchester, England fund, says he has added some cyclical exposure that should benefit from the expected pick up in the economy.
Doran has recently bought the newspaper and publishing group DMGT's 7.5 % notes of '13. He reasons that advertising is picking up and should further benefit from the upcoming Olympics and the U.S. presidential election. Another addition is triple-B rated Finning International, a reseller of Caterpillar equipment in Canada and the U.K. Doran also bought a recent 6 3/8% of '08 issue from BG Group, which owns a liquid natural gas plant in Lake Charles, La., as play on the U.S. being a net importer of energy.
As for the manager's favorite issuers, Solus has been adding to its positions in Gallagher, the tobacco company, British Telecom, France Telecom, Northumbrian Water, Wessex Water and Carlton Communications. Solus owns FT's 9% of '11, Northumbrian's 6% of '17 and Wessex Water's 5 1/8% of '09. Doran says he expects Carlton's bonds to tighten further once the merger with Granada is finished.
Doran sold BT's 7 3Ž8% of '16, a nominal bond, and bought BT's index-linker 3 1Ž8% of '25. He says that he has been switching into index-linked corporates, because of the significant spread difference versus nominal bonds. For example National Grid's nominal bond trades at roughly 75 over gilts while the index-linked is at 155 over.
Solus does not use a benchmark index.