You don't need a pair of binoculars to notice that bond folk are back on the circuit, talking up their asset class.
And why wouldn’t they be, with yields north of 4 per cent on govies, and perhaps twice that on investment grade?
We have dipped several of our toes into the government bond sectors of late, so thought it time to take a peek at the world of corporate bonds.
And the main takeaway is that most of the cash here is split between two funds, both owned by eight of the portfolio managers we cover.
Stephen Snowden’s Artemis Corporate Bond fund has long been a favourite in our database and has grown to £1.5bn in size - nearly doubling in size in two years. It managed to pick up a net of one new allocator in 2023.
Snowden’s fund has rewarded those allocators who jumped aboard early, with top quartile returns in every year except 2022 when it was a hardly desperate second quartile.
The fund is positioned in quite a bullish way, with the largest sector exposure being to financials, and government bonds being less than 3 per cent of the portfolio.
The fund which shares its crown with Artemis is an upstart, having picked up a net of five new buyers in 2023 and one in early 2024: Man GLG’s Sterling Corporate Bond fund.
It is managed by Jonathan Golan, a former Schoders employee who joined his present shop in mid-2021 when he launched the fund in question.
As to why the inflows, well the fund is the absolute top performer from 97 mandates in the sector over the year to March 5, and by some margin, returning 21 per cent, compared with a peer group return of 6 per cent.
It does have the advantage that it launched in late 2021, just before bond prices started to fall, allowing it to enter the market, pick up cheap assets and wait for the tide to turn.
The fund is just under £900mn in size, but it’s unlikely to stay that (relatively) small if it keeps producing those numbers.
Longer-term readers of Asset Allocator might recollect that we haven't mentioned Rathbone Ethical Bond, which as recently as January 2023 was the most popular fund in this sector in our database.
This fund, which is run by Bryn Jones, hasn't so much lost buyers (though it has gone from being owned by six allocators to five over the past year) but it has been overtaken by Artemis and Man GLG.
Since January 2022 the fund has fallen in size from nearly £2.8bn to just over £2bn but this doesn't appear to be caused by performance issues - it has delivered top quartile returns in three of the past five years, and in those when it didn't it delivered second quartile returns.
Jones has long maintained a fondness for financial services bonds, and those comprise almost 80 per cent of the portfolio.
At a time of cost pressures, its main unit is among the 10 most expensive funds in its sector which may explain why allocators have looked elsewhere.
But it is not alone in suffering at the hands of what appears to be some amount of consolidation in this sector. TwentyFour Corporate Bond has lost half its followers in our database and is now only held by two allocators.
