Market Review
March delivered a third successive month of strong performance for investment-grade and high-yield corporate bonds. The yield spread over government bonds tightened, and total returns were positive. Credit continues to benefit from European Central Bank's lending to liquidity-strapped banks, with financial securities performing strongly.
Fund Performance
Strong performances from investment grade financial and non-financial credit and sub-investment grade bonds during January and February continued during the early part of March. However, resurgent concerns about the periphery of Europe dominated investors thoughts again as the month closed out leaving credit markets broadly unchanged on the month.
Fund Positioning
We continued to de-risk the portfolio, locking in profits. This involved reducing the proportion of banking sector holdings and switching into more highly-rated bank bonds. We bought a euro-denominated bond issued by Luxottica (ultimate owners of Ray-Ban and Oakley sunglasses) and a new issue from commodities group Glencore.
Roger Webb & Luke Hickmore
31 March 2012