Fund of the week: The beauty of asset-backed bonds
Strategic funds are popular at the moment. But this government and corporate bond fund stands out from the crowd.
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Ariel Bezalel, who runs the Jupiter Strategic Bond Fund, is an up and coming fund manager to watch, says Emma Dunkley in The Independent on Sunday. "Strategic funds are very popular at the moment however, they are not all the same," Philippa Gee of Philippa Gee Wealth Management tells the newspaper. "Ariel thinks a lot more strategically than the others and deserves more attention than he receives."
The fund focuses on achieving high income and capital growth by investing in high-yield bonds, government bonds, preference shares and other bonds. It is up by 5.8% over one year and 70% over five. The success of the fund since it launched in 2008 has been down to Bezalel's approach to risk management, says Gee. "His use of gilts from Australia and Norway has proved a classic example of this approach," she says.
As fear of sovereign debt default plagues Europe, Bezalel has cut the fund's government bond exposure, selling off holdings in Canadian and Norwegian bonds. But he's keeping the Australian bonds, he tells Investment Week. "Australia has excellent finances relative to its Western peers, with net debt-to-GDP of only 6%."
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Bezalel believes corporate bonds also offer value for money. Companies are "in much better shape than governments and we believe there is plenty of value on offer, particularly at the senior secured end". However, he is wisely steering clear of "highly leveraged business models" and instead investing in bonds that are "secured on real assets, such as oil rigs or property".
Contact: 0844-620 7602.
Jupiter Strategic BondFund top ten holdings
| Australian Government 5.75% 2022 | 6.78% |
| Australian Government 5.5% 2023 | 4.43% |
| Australian Government 4.75% 2027 | 2.57% |
| TUI Travel 6% CV 2014 | 2.06% |
| Spirit 5.472% 2028 | 1.95% |
| Interxion Holdings 9.5% 2017 | 1.80% |
| Royal Bank of Scotland 6.934% 2018 | 1.77% |
| Asian Development Bank 2.85% 2020 | 1.75% |
| Eksportfinans 5.5% 2017 | 1.50% |
| Golden Close Maritime 11% 2015 | 1.42% |
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