By Tom Aylott, Reporter, Trustnet, 19 October 2023:
Government bond yields rose to their highest levels in more than a decade last week as investors sold out of them en masse.
Strong employment data from the US proved that the Federal Reserve’s (Fed) efforts to slow inflation were not as effective as anticipated, making it likely that interest rates would stay higher for longer.
Investors dropped their government bonds on the back of this news and bought others offering a greater yield, consequently lowering their prices.
The volatility from an asset class investors may have previously considered a reliable ‘safe haven’ could lead them to wonder how they can defend their fixed income assets within their own portfolio…
For investors willing to take on more risk, QuotedData senior analyst Matthew Read said CQS New City High Yield has delivered strong performance whilst being defensive against market volatility.
Offering a 9.3% yield today, the fund has made a total return of 68.4% over the past decade, although this came with more than three times as much volatility as the Premier Miton fund above (14.4% vs 4.6%).
Read noted that long-running manager Ian Francis, who has led the trust from launch in 2007, has “a strong focus on capital preservation and a core set of holdings that are well understood”.
He added that, although high yield bonds are at the upper end of the risk spectrum in fixed income, Francis spreads exposure across a diverse range of sectors in developed jurisdictions.
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