GLG’s Jon Mawby has added Apple bonds to his funds after prices fell roughly 9 per cent since launch six weeks ago.
The manager had refused to take part in the tech giant’s $17bn (£10.8bn) bond issuance at its launch on April 30, but has now added exposure to the 10-year bond in his £122.1m Strategic Bond and £117.4m Global Corporate Bond funds.
When Apple launched its bonds, the issuance was three times oversubscribed with investors clamouring to snap up the security on the back of its high credit rating, strong brand, and history of innovation and growth.
At the time, Mr Mawby said the issuance “once again demonstrates a bond market in overdrive as investors continue to reach for yield”, adding that the rationale for the bond was “more worryingly” designed to return cash to shareholders.
But the manager took advantage of the price weakness at the start of June, adding some of the Apple 10-year bonds to his funds that were underweight duration.
“It made sense to lower the [duration] underweight and it made sense as it is a high quality company which has been repriced,” he said.
“If the interest rate volatility continues the [prices on the] bonds have scope to fall further,” the manager said.
While Mr Mawby bought the bond after its price fell, Rich Smith, portfolio manager on the Aberdeen Strategic Bond fund, bought it at issue.
But he said he was “comfortable” with the fund’s holding. “Apple bonds have recently underperformed with other corporate issuers in response to the sell-off in government bond markets,” the manager said.
“Since we invested in the bonds the fundamentals of Apple have not changed; the company has a great brand, is financially strong and has a good business model.
“We expect that high quality issuers like Apple will outperform lower quality issuers in a credit risk sell-off. Therefore we remain comfortable holding the debt.”
Elsewhere, other big name investment grade corporate bonds have also suffered a drop in price.
Vodafone, Diageo and Petrobras all suffered declines from issuances in the past few months, as yields rose following Ben Bernanke’s suggestion that the US Federal Reserve will consider reducing its programme of quantitative easing if economic data improves.
