It has been a challenging time for investors over recent years. Heading into the new year, we continue to face a low growth, low interest rate, low yield world. Ian Spreadbury, manager of the Fidelity MoneyBuilder Income Fund, expects another year of weak growth in 2013. He is wary of the high levels of global debt and does not anticipate a significant improvement in economic growth until these debt levels have been reduced.
Quantitative easing, together with ultra-low interest rates, may have kept the economy afloat, yet could cause further unintended consequences. Against an uncertain economic backdrop, Ian Spreadbury believes risk management in the fund is vital. He has maintained a high level of diversification in the portfolio across a number of sectors.
Around 85% of the portfolio remains invested in high-quality corporate bonds (also referred to as investment grade corporate bonds). Ian Spreadbury continues to find value in this area of the bond market and, in his view, many of these bonds continue to offer attractive yields. He prefers the bonds issued by larger, stable companies which are supported by strong balance sheets and healthy levels of cash.
Given his cautious stance, Ian Spreadbury tends to focus on sectors less sensitive to the wider economy, aiming to shelter the fund against any potential further negative outcomes stemming from the financial crisis. He favours defensive areas such as the telecommunications and consumer staples sectors which consist of companies producing essential goods and services, regularly purchased by consumers.
Ian Spreadbury remains wary of the financial sector, believing it is still going under major repair. While banks continue to wrestle with high debt levels, he views their bonds as more volatile compared to other higher-quality bonds. He has, however, found some attractively valued areas in financials and holds a 20% weighting in the sector. This position is largely in covered bonds - these are bonds backed by a pool of assets that secure the bond if the issuer becomes insolvent and defaults on its payments.
Ian Spreadbury has managed this fund since its launch in 1995 and has an extensive knowledge of the corporate bond market. Since launch, the fund has returned 189.4% compared to a sector average of 149.9%*, although past performance is not a guide to future returns. His defensive approach to investment has enabled him to navigate the fund through difficult market conditions. We believe this investment style could benefit investors over the long term and the fund remains on the Wealth 150 list of our favourite funds across the major sectors.
|% Growth 01/02/08 to 02/02/09||% Growth 02/02/09 to 01/02/10||% Growth 01/2/10 to 01/02/11||% Growth 01/02/11 to 01/02/12||% Growth 01/02/12 to 01/02/13|
|Fidelity MoneyBuilder Income Fund||-8.8||22.2||5.1||8.9||8.3|
|IMA £ Corporate Bond||-13.0||22.1||3.9||6.4||9.2|
Past performance is not a guide to future returns. *Source: Lipper 01/02/2013.
|Fund manager's initial charge||0.00%|
|HL saving on initial charge||0.00%|
|Net initial charge||0.00%|
|Fund manager's annual charge||0.80%|
|HL annual saving||0.00%|