In the medium to longer term the manager attributes performance to the compression in both yields and spreads. He explains: “In relative terms we have been underweight duration. This particularly affected performance in 2014 and also year to date. In addition we are underweight in financials and this would have been a detractor to performance in 2012. We prefer to remain underweight financials mainly because it represents around a third of the iBoxx Sterling Corporate index, and as we want to have a more diversified portfolio we would not allocate a third [of the fund] to one single sector.”
With 2016 posting some surprise events, Mr Woolnough notes recent changes include an increase in fund duration in response to the ‘Leave’ vote in June, which meant duration “hovered around 7.1 years over the third quarter”.