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Gilt-y pleasure

Gilt yields have spiked in recent days as the market ponders the possibility of a Liz Truss government.

Yields hitting 5 per cent, as they have done at the short end, is enough to cause even the most jaded of market participants to pause for thought. 

But Rob Burgeman, a divisional director at Brewin Dolphin whose wealth management career began in the year Kylie Minogue was singing about how lucky she was, is relishing the chance to take advantage of higher yields and lower prices. 

But Burgeman, unusually for a wealth manager, is increasing the exposure to gilts in client portfolios by buying the assets directly, rather than through a fund. 

He says buying gilts at the yields offered for much of the past 15 years was "like burning money", but now he finds them more interesting. 

Burgeman believes that by upping bond exposure he can be "more adventurous" in other parts of the bond market in search of returns.

Because there are no liquidity or credit risk concerns, many of the allocators on our database get their gilt exposure through passive funds. But buying directly cuts out the middleman, and the fees. 

He describes himself as "neutral" on the prospects for high yield bonds in the current climate but when investing in more exotic parts of the bond market, he always uses funds.

In that high yield space, his preferred fund is Axa US Short Dated High Yield. He says he prefers to stay short-dated in this asset class as many of the bonds are bought back before maturity anyway. 

This is quite a popular fund among the allocators on our database, appearing in five portfolios, and being bought by two new allocators since the start of this year. 

In the strategic bond space he owns Artemis Strategic Bond, which appears in the portfolios of three of the other portfolios we cover, and Schroder Strategic Bond, which no other allocator owns.

Burgeman's adventurous streak is perhaps advertised best by his holding of the Muzinich Tactical Credit fund, a go-anywhere fund which presently has 45 per cent in US government bonds and the rest in an assortment of high yield instruments.

This fund is held by five of the allocators on our database. 

Brewin Dolphin’s Balanced portfolio presently has 20 per cent in fixed income, which is marginally below the average allocation of 24 per cent, though that might be changing quickly given how enthused Burgeman is.

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