London-based Jupiter Asset Management, which manages £300 million in fixed-income, is waiting for signs of stability in the equity markets and an economic rebound before extending its risk profile. John Hamilton, head of the fixed-interest funds, says he is keeping his eyes open for better corporate earnings and improved economic data before going more wholeheartedly into single-As and triple-Bs. "The market itself can be a lead indicator--when the spread between governments and triple-A corporates gets too tight, that could indicate the market as a whole has become much too risk-averse and too expensive to justify holding," he says. "Those are the kinds of signs I'm looking for. The trick is seeing them earlier than other people," he adds.
"If we got to the stage where there is more appetite for risk, I may be inclined to be stronger into telecoms," says Hamilton. Otherwise, he may look at credits that would benefit from cyclical factors such as general industrial-type names. When picking credits, Hamilton says valuations will drive his choices more than economic factors. He says he may also consider dabbling in high-yield and emerging market names.
This year, Hamilton has been moving the fund to a risk-averse posture. "I've upped the position in triple- and double-A bonds, because that's where the posture would be more rewarding," he says. He is still risk-averse. "It seems appropriate to carry on like that for the time being," he adds. In terms of credits he has added, Hamilton tended to focus on credits that are solid, stable, cash-flow generating companies in defensive sectors such as food retailers, tobacco and utilities. He declined to say which credits he has added. The fund invests in sterling-denominated corporates and uses the British government all stocks index as its benchmark.
