Swip Strategic Bond fund: Roger Webb

Manager Roger Webb points out the fund, which is managed on a total return basis, is broadly run against the IMA Sterling Strategic Bond sector, but specifically he and co-manager Luke Hickmore manage the fund against its true strategic bond peers.

“These are funds that have the same degree of flexibility as we’re given. There are some funds within the sector that have index benchmarks and therefore always have more or less exposure to certain parts of the universe. In 2011, it was exposure to duration or interest rate sensitivity. Most of the more strategic funds would have tended to have a strategic short position in terms of duration so they wouldn’t have had as much as the typical index fund and therefore would have underperformed these,” explains Mr Webb.

“That being said, we consider we had a pretty good year last year, we were ahead of the true peers and about the middle of the pack in terms of the overall sector. But the thing we really didn’t capture perhaps as well as we might have done was the interest rate sensitivity, although we increased our duration exposure in June, July and August.”

The fund, which is more than 18 months old, produced a discrete return of 0.86 per cent in 2011, compared with 3.57 per cent from the IMA Sterling Strategic Bond sector. For the year to date to January 18, performance has improved, with the vehicle returning 1.61 per cent, slightly ahead of the sector’s 1.52 per cent, according to Morningstar.

The managers’ focus on key investment themes led them to pare back their exposure to financials, in the first quarter of 2011, particularly to peripheral Europe. However, this began to reverse by the end of the year as they sought to take advantage of opportunities created by market volatility. “Although we spent some time actively managing the risk of the fund down in the early part of the year, toward the end we were more confident and able to add some more risk back to the fund, specifically through high yield but also through the financial sector as that asset class reached sufficiently attractive levels to [make us] want to re-enter,” says Mr Webb.

As of December 31, the portfolio’s largest weighting was in financials at 30.7 per cent, closely followed by a 24.5 per cent allocation to high yield, which includes both European and US high-yield holdings.

Mr Webb adds: “We look for themes that are going to drive the various asset classes over the forthcoming period so we tend to look three to six months out from most asset classes but clearly take tactical shorter-term views as well. Some of the themes we’re looking at are a continuation of volatility driven primarily by uncertainty in Europe but also uncertainty with regard to the pace of economic recovery globally.

“So thematically that pushes us away from Europe and into other asset classes in the US, some emerging markets and the UK. Another theme we’re following at the moment is inflation. We do think there is a major risk of significant inflation further down the road and therefore we’re looking at ways to benefit from that view.”