Every now and again, an opportunity is simply too good to turn down.
It is how I feel when I hear any player being linked with joining Chelsea Football Club. With my biased blue hat on I could not imagine why any player would reject the opportunity – it should be a no-brainer.
Stephen Snowden has an exceptional track record dating back more than two decadesIt is also how we felt as a team late last year, when we heard Artemis were planning to launch a corporate bond fund under the management of Stephen Snowden, one of the most experienced bond fund managers in the UK.
Mr Snowden has an exceptional track record dating back more than two decades. He began his career at Aegon Asset Management in 1994 and was managing the Sterling Corporate Bond fund for the firm by 2000.
He moved to Old Mutual Asset Managers in 2004 to run their corporate bond fund, before returning to Aegon (then called Kames) as co-head of fixed income, managing a number of funds for the asset manager.
Last year Mr Snowden joined Artemis - bringing with him four other fixed interest team members as they planned to launch a suite of fixed income offerings.
The Artemis Corporate Bond fund was launched in October 2019 and, unbeknownst to him at the time, Mr Snowden would go on to benefit from the tailwind of being nimbler in a newly launched vehicle, which allowed him greater access to some of the bonds issued in the wake of Covid-19.
Stephen looks at the fundamentals of a company, taking into account where we are in the economic cycle, as well as the outlook for inflation and monetary and fiscal policies.
He then analyses corporate profitability and management strategy, assessing whether it is beneficial for bondholders.
He looks at whether there are any factors hindering or improving the company’s competitive positioning and identifies any risks.
Valuation then comes into play. How does the bond’s yield compare with others issued by the same company or those issued by its competitors?
Technical factors are then examined. For example, has a company previously over-borrowed, which has driven yields higher, and it is now trying to repair its balance sheet?
This should cause the bonds to recover as debt is reduced. Conversely, a company might be in strong financial shape but undertaking an ambitious merger and acquisition programme, which would increase its debt substantially.
Mr Snowden also analyses whether a company or a sector is suffering from negative sentiment, which has suppressed prices further than the situation warrants, and assesses any structural changes that may materially impact certain sectors.
He aims for diversification to avoid any unintended industry or name concentration.
Mr Snowden and the team focus on UK, US and European issues, with at least 80 per cent of their assets in sterling or hedged back to sterling.
The result is a diversified portfolio of 75-150 holdings. It will be invested largely across investment grade corporate bonds (80 per cent), although Mr Snowden can also invest in high yield, hard currency emerging market debt, government bonds and non-rated credit, depending on his view of the economic environment.
It is early days, but since launch the fund has already returned 8 per cent to investors compared with a peer group average of 4.1 per cent, having enjoyed a strong rebound from the market lows. It has an ongoing charge of 0.4 per cent.
Mr Snowden is one of the most highly regarded bond fund managers in the UK. He combines his knowledge and understanding of the macroeconomic backdrop, with his credit analysis and technical understanding of the bond market.
We see no reason why his success cannot continue at Artemis – starting with this fund.
Darius McDermott is managing director of FundCalibre
