By Emmy Hawker, Senior reporter, Trustnet, 04 November 2025:
With government debt levels surging and long-term interest rates of the rise, investors are facing a markedly different yield environment than in recent years, prompting them to reassess where value and resilience can be found.
Trustnet asked fund pickers to select funds they believe are well-positioned to benefit from this shift – from short-duration bond funds and high-yield credit to equity portfolios with strong pricing power..
James Carthew, head of investment company research at QuotedData, selected the £330.3m investment trust CQS New City High Yield, which invests in high-yielding fixed-interest securities.
“By focusing on high yield issues, where credit spreads can have more of an impact on returns than shifts in the risk-free rate, and by keeping the duration relatively tight at about three years currently, the manager was able to navigate the post-Covid environment of rising interest rates successfully,” he said..
“The portfolio is very differentiated from peers, with a bias to relatively small issues which tend to attract a yield premium, and in securities that the manager feels are undervalued,” Carthew said. “The approach means that good credit is vital to the trust’s success.”
Dividends to shareholders have also been “climbing steadily”, increasing each year for the past 18 years to today’s 9%. “The trust has a revenue reserve to cushion the impact of any short-term revenue shortfall,” Carthew added.
He also noted a bias to sterling issuers in the portfolio, which reduces the effect of adverse foreign exchange movements.
Although the trust languished in the fourth quartile for total returns in its sector over three years, it was in the first quartile over one, five and 10 years – gaining 104.7% over the decade.
Read more here