Hargreaves Lansdown has removed Phil Milburn’s £1.7bn Kames High Yield Bond fund from its Wealth 150 list due to concerns about a “sharp fall in the bond market”.
The discount broker has taken the fund off its recommended list because it prefers strategic bond funds “which have the flexibility to invest across the fixed interest spectrum”.
Richard Troue, head of investment analysis at Hargreaves, said the Kames fund was managed by “a high calibre team” but warned it would be “increasingly difficult for them, and other high yield bond fund managers, to add value for investors in the prevailing environment”.
Mr Troue also highlighted that the “fund’s annual charge is high compared to similar funds”.
There are now no funds focusing solely on high yield in the Wealth 150 list.
High yield bond funds have delivered stellar returns since the financial crisis as a low interest rate environment has sent investors into the asset class hunting for income.
But Mr Troue pointed out that the average yield on a European high yield bond was now 4.2 per cent and he said investors were “receiving very little additional reward… for the significantly higher risk” of owning high yield bonds.
He said: “High yield bonds are sensitive to economic conditions and at current levels, any slight deterioration in the economic outlook could see a sharp fall in the bond market.”
A spokesperson for Kames said: “While obviously we are disappointed to be removed from Hargreaves Lansdown’s Wealth 150, we believe the multi-award winning fund remains competitively priced and is still one of the standout funds in its sector.
“This is demonstrated by its excellent and consistent performance over all timeframes.
“The fund is first quartile and within the top three in its sector over five and 10 years as well as since its launch in March 2002. It is first quartile year to date and second quartile over one and three years.”
Mr Milburn had earlier this week hit out at critics of high yield bonds, accusing many of them of spouting “nonsense” about the sector and ignoring its attractiveness relative to other forms of fixed income.
