Play your cards right and win in corporate bonds

Mr Potter says prudent pricing of bonds is crucial. He adds some fixed income managers have been valuing the bonds on their books based on the average available from market makers. When it comes to sell those bonds, the actual price realised is lower. He says: “Those that took a more aggressive approach to pricing have seen their portfolios marked down significantly.”

Aidan Kearney, head of UK multi-manager at Credit Suisse, says in the instances where he takes credit exposure in his funds, he looks for very conservative, fundamentals-driven managers. He uses specialist fixed income investment house Bluebay.

That said, he is keeping a spread across the fixed income spectrum, holding Invesco Sterling Bond as a beta play on the credit space and Franklin Templeton Investments and Julius Baer for government bonds and currency.

Mr Potter believes this year may see a significant difference between the returns of different corporate bond fund managers. Decisions on the banking sector, liquidity and their skill at analysing credit risk will all affect performance, along with the experience of these managers.

Could the government’s plan to buy back bonds help some companies and inject increased liquidity? Mr Jones thinks not, because the government is apparently focusing its attention on areas of the market where there is already good liquidity.

He says: “This is supposed to take a reverse auction process, whereby we can sell our bonds back to the Bank of England. Unfortunately this is only the businesses we can sell anyway. It might help some of the property companies, but for companies like Nationwide, the government is apparently not interested.

“It will crowd the market out even more, making it cheaper for larger companies to refinance, which monetary policy has done anyway. It won’t help where it’s needed.”

Cherry Reynard is a freelance journalist