Barings’ Guy Dunham is opting for a low-risk portfolio on his recently revamped Strategic Bond fund.
In March this year, Barings converted its Global Bond Trust into the Strategic Bond fund and appointed its head of global aggregate as manager.
The £75m vehicle has outperformed the Investment Association Global Bond sector since Mr Dunham’s appointment.
The fund lost 0.9 per cent from the start of March until July 27, while the sector lost an average 2.4 per cent, data from FE Analytics shows.
Mr Dunham thought it was best to remain cautious in the current environment.
While the situation in Greece seems to have calmed, he has reduced his risk to the peripheral European countries, in which he holds roughly 30 per cent in bonds.
This allocation was split between five-, 10- and 30-year bonds earlier in the year.
Mr Dunham has since dumped the 30-year bonds and has put this part of his portfolio into five- and 10-year bonds.
“We are going to keep our risk in this area at a lower level until we see the impact of the Greece package and the sentiment with the election in Spain,” he said.
The ruling Partido Popular party in Spain must combat the growing support for new populist parties in the December election.
This surge in support follows a deep recession in Spain and a series of corruption scandals that have surrounded the current party.
In spite of keeping a low-risk portfolio in peripheral Europe, Mr Dunham is optimistic about the outlook for the region.
“If you look at the European Central Bank, it is going to be supportive,” he said.
The manager is running the portfolio at the lower end of his risk range in another attempt to mediate risk.
He said he would normally run the fund at between zero and eight years and that he was currently operating it at about three years.
Macroeconomics is not the only thing spurring Mr Dunham to lower the risk in his fund as liquidity is becoming an ever-growing concern for bond managers.
He added that any bond manager who said he was not concerned about liquidity was “not being honest with himself”.
“It means increased volatility and we have to be more aware of risk, but the natural consequence is that people take less risk,” the manager said.
Mr Dunham also removed all the currency risk within his portfolio earlier in the year, although he is beginning to add some back in.
He had roughly 20 per cent of the fund in the US dollar before reducing that to a neutral position.
However, he is rebuilding that currency holding and at the end of June he had 15.1 per cent in the dollar.
