Its five-year return of 39.98 per cent is just ahead of the IA Sterling Strategic Bond sector average of 32.78 per cent to April 30, according to FE Analytics data.
Shorter-term performance has been a bit weaker, as Mr Munro notes that in 2014 “we gave a little bit of performance back as we remained cautious on government bond yield levels”, noting that the fall in government bond yields last year “caught us a bit by surprise and with retrospect [we] could have done with a bit more duration”.
But he adds the team will not change their views based on very short-term views, as he says the managers consider “three to five years is still the right profile for this point in the cycle where valuations are”.
Meanwhile, a more recent change has been to “put a little bit of protection on to the portfolio through crossover, which is a default swap index, as a way of taking out some of our high-yield exposure and risk”.
He explains: “The reason we’ve put that on is a short-term view round the Greek situation and also the secondary factor is the UK general election.”
Jake Moeller, head of Lipper UK & Ireland research, Thomson Reuters
Standard Life has built up some formidable intellectual capital and its hiring of Messrs McKernan and Munro from Swip certainly bolstered the ranks. This fund has seen a number of iterations throughout its history but now seems to be settled on an emphasis on sterling credit and high yield in particular. While low default rates prevail, this fund will do well – and the multitude of scenario-testing SLI undertakes should mean a reasonably nimble asset allocation change if the environment alters.