The recent launch of a sustainable bond fund by Rathbones Asset Management takes the company’s fixed income range to four products and assets north of £2.6bn.
Rathbones' head of fixed income, Bryn Jones, will run the new Rathbone Greenbank Global Sustainable Bond Fund, alongside the existing £2bn Rathbones Ethical Bond fund and Strategic Bond fund.
Meanwhile his colleague Stuart Chilvers runs the £200mn Rathbones High Quality Bond fund.
A new hire will join the firm in January and bring the number of managers running the four funds to three.
In total, there are seven investment professionals on the team.
Jones, who has been at Rathbones for 19 years, told FT Adviser: “The new fund will take a more global approach and so is more strategic.
"The new sustainable fund is more globally focused than the existing Ethical Bond fund, and can also invest up to 15 per cent in government bonds, which the ethical fund cannot do.
"But with both funds, the sustainable and ethical work is done by Rathbone Greenbank Investments, they have a veto on the investment decisions, whereas with some of our peers the fund manager does the ESG work as well, which can create a conflict.”
The new fund is in the IA Sterling Strategic Bond sector, while the Ethical Bond fund sits within the IA Corporate Bond sector.
Jones has in recent months been upping the duration of his funds, though in most cases is neutral, rather than materially overweight.
The Ethical Bond fund is among the top 10 per cent of performers in the sector in 2023, something he attributed to having had less duration in his portfolio than many peers.
He said the market expected a recession in 2023, which prompted a general shift into longer duration bonds, but when the recession didn’t arrive, shorter duration bonds performed better.
Jones said he believed the recession would be delayed due to the lagged effects of monetary policy and so was shorter duration than many of his peers coming into 2023.
Though, as he expects economic conditions to deteriorate from here, he has increased his duration.
Longer duration bonds are usually expected to perform best when a recession is anticipated as investors believe interest rates will be cut.
Chilvers replaced the previously long-serving Noelle Cazalis on the team, with the latter having left the industry.
The High Quality Bond fund tends to focus on shorter duration bonds and is required to have a big majority of its capital in bonds with a credit rating of A- or better.
Jones said: “One of the lessons to take into next year may be that when the US government bond yield drops by 50 basis points in a month, that usually leads to a rally in risk assets on the months that follow, and since November we have had that level of movement in the Treasury yield.”
Darius McDermott, managing director at Fund Calibre said: "The Ethical Bond fund has a very long-term track record and it is one we recommend, it is of course one of the leading ethical bond funds but actually even for investors who do't have ESG as a priority it aslo works."
david.thorpe@ft.com
