Onuekwusi spreads gilt holdings
Aviva Investors’ Justin Onuekwusi has said he is diversifying gilt holdings across his range of multi-asset funds because they could pose a “big problem” in future.
Mr Onuekwusi, fund manager for the Aviva Investors’ range of five multi-asset risk-targeted funds, said he has been chipping away at the gilt holdings in the portfolios over the past year by 50 per cent to 60 per cent.
Instead, he is diversifying into global government bonds, short duration high yield bonds, and has added a small allocation to absolute return bond funds.
He said: “Gilts are a big problem so we are diversifying our gilt holdings. We are trying to become more active in the fixed-income space.
“Just a couple of weeks ago in the global high yield bond space we diversified into short duration and normal high yield.
“More managers in the US are going into the short duration, high-yield space and we are seeing a lot of launches of these types of funds. However, it is still a new asset class.”
Commodities sector has also seen aggressive cuts across all funds. During the past six months, Mr Onuekwusi has cut commodities by 80 per cent because they have become too correlated with equities.
He explained this was partly due to commodities becoming more investible and tradeable in recent years.
Scott Gallacher, director for Leicestershire-based Rowley Turton, said: “We are trying to avoid holding any UK gilts as far as we can. When you work out the maths it’s just crazy. After you factor in an AMC on gilt funds you are virtually guaranteeing clients a loss.
“Most developed market yields are so low their only place is as a complete an utter safe haven, but in that case you would be better off holding cash, where there is no AMC.”
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