The newly appointed head of fixed income at Titan Wealth plans to offer exposure to tax efficient direct bonds in model portfolios and launch a range of specialist bond funds for clients, FT Adviser can reveal.
Titan’s business plan involves growing, organically and via acquisition, to reach £50bn of assets under management within three to five years.
Peter Doherty, a 30-year veteran of bond markets, joined Titan Wealth Solutions this month to build out the firm's first fixed income offering.
In addition to running funds himself, he will have an “input” into which third party funds are chosen by the wealth manager.
He told FT Adviser: “The aim is to give clients institutional quality fixed income offerings in the wholesale and retail space.
"In the equity space, clients can probably already get that, but not in bonds, and perhaps the biggest innovation is in terms of offering a direct bond portfolio.
Deeper into the credit space is where I think we can offer value"A lot of people know that if you buy gilts directly, at say 90p and hold to maturity where you get paid at par, the gain is tax free. But that is also true for Qualifying Corporate Bonds which are held in a model portfolio structure, rather than a fund structure.
"Qualified Corporate Bonds are actually a large part of the market but not that easy to access for the end client.
"We intend to make the product we launch - which is risk weighted - available to other discretionary wealth managers as well.”
He has taken with him the Hybrid Capital Bond fund he previously ran at Tideway and Sanlam, and says that while more funds will be launched, he wants to be "very careful about what we can do".
"Areas such as government bonds and high quality corporates we will do via third party managers," Doherty explained.
"But deeper into the credit space is where I think we can offer value, and so I would expect us to launch funds in areas such as high yield, special situation bond funds and emerging markets.”
In terms of where the value is in bond markets right now, he said: “For me the key is that area around five to seven years duration if you are a medium term investor and happy to own until maturity.
"Of course, if you are buying a house or have school fees or something in the next couple of years, then just owning something with a maturity of two years and picking up the coupon works. "
Doherty said that while many clients right now are looking at 5 per cent interest available on cash savings accounts and viewing it as attractive relative to bonds, “the risk they are taking is that cash rates come down again".
"If they get the 5 per cent interest for one year or two, but then cash rates fall back to say, 2 per cent, they may be rueful they didn’t buy the bonds that have locked in the gains for multiple years and held them to maturity," he said.
Doherty’s view is that the bond funds which will succeed in this market will be those “run by managers that aren’t traders and managers that are happy to own these assets to maturity.”
david.thorpe@ft.com
