Most wealth managing portfolios hold some bonds Enable's experienced IFA’s know that bond duration can be a useful indicator as to how the fund will perform, as the movement of bond yields is inversely correlated to the performance of the fund. This means that portfolio managers tend to hold different duration bonds in order to work out a weighted duration.
For example, in Chris Bowie’s Ignis Corporate Bond fund the duration is currently 7.6 per cent, slightly below the index of 7.8 per cent. This means the manager has less duration risk than the index. In short, this means is that for every 1 per cent that yields rise, the fund will lose 7.6 per cent, while for every 1 per cent that yields fall the fund will rise 7.6 per cent.
Last year Bowie stated he had duration greater than the benchmark, but says he had been shortening that position this year to now be slightly underweight the benchmark, adding that his fund is “getting ready to go quite a bit shorter.”
“Having duration risk will be one of the biggest risks over the next five years because yields are so low there is not much left to go for. I don’t think there is much left on the table.” At the moment 10-year UK gilt yields are trading around 2 per cent and have dipped as low as 1.9 per cent.
If you want to look at the distribution of your portfolio Enables experienced IFA’s are happy to talk it though with you.
Wednesday, 16 May 2012
How to protect yourself against above target inflation
Many fund managers are taking short duration bonds to manage risk and enhance performance believing that yields have nowhere to go but up. So how does duration affect the risk and performance of a bond portfolio? Lets first define and quantify what is meant by duration and how it is applied.
Duration is a measurement of how long, in years, it takes for the price of a bond to be repaid by its internal cash flows. It is an important measure for investors to consider, as bonds with higher durations carry more risk and have higher price volatility than bonds with lower durations.
For the two most basic types of bonds the duration calculation varies: a zero-coupon bond has duration that is equal to its time to maturity; a bond that pays a coupon will always have a duration that is less than its time to maturity.
Thus on a zero-coupon bond the entire cash flow occurs at maturity, while a bond that pays coupons yearly and matures in, five or ten years will conversely repay the amount paid for the bond sooner.
Duration can also be used as a measurement of a bond portfolio’s sensitivity to interest rate movement in response to expectations that stronger economic activity will fan inflation, eroding returns on securities that pay fixed rates of interest. Enables IFA’s are always able to help you understand how to make the best of the bonds you hold in your portfolio.
Duration is a measurement of how long, in years, it takes for the price of a bond to be repaid by its internal cash flows. It is an important measure for investors to consider, as bonds with higher durations carry more risk and have higher price volatility than bonds with lower durations.
For the two most basic types of bonds the duration calculation varies: a zero-coupon bond has duration that is equal to its time to maturity; a bond that pays a coupon will always have a duration that is less than its time to maturity.
Thus on a zero-coupon bond the entire cash flow occurs at maturity, while a bond that pays coupons yearly and matures in, five or ten years will conversely repay the amount paid for the bond sooner.
Duration can also be used as a measurement of a bond portfolio’s sensitivity to interest rate movement in response to expectations that stronger economic activity will fan inflation, eroding returns on securities that pay fixed rates of interest. Enables IFA’s are always able to help you understand how to make the best of the bonds you hold in your portfolio.
How to make the most of your bonds?
Independent Financial Advisors like Enable acknowledge the fact that with continued equity market volatility many of the traditional ‘safe haven’ investment options like government bonds are offering historically low yields, so many investors are looking for alternatives.
Recent figures from the Investment Management Association for March however showed fixed income was the most popular asset class as a whole for the seventh month in a row with net retail sales of £660m. Also, the IMA Sterling Strategic Bond sector was the best selling of all IMA sectors for the month.
The sector, which contains funds that invest at least 80 per cent of their assets in sterling denominated fixed interest securities - or securities that are hedged back to Sterling - recorded net retail sales of £366m, the highest figure since April 2011, and significantly above the monthly average for the previous 12 months of £211m. Investor inflows into these funds mean it is the second largest fixed income sector at £25.6bn, second only to the £52.8bn Sterling Corporate Bond sector.
Andrew Sutherland, head of credit and aggregate at Standard Life Investments and manager of the £92.1m Standard Life Investments Strategic Bond fund, says most people think of bonds as having very few differences but he adds: “There’s a vast amount of difference in terms of risk and performance in bonds. You’ve got high yield which is very cyclical and high yielding, but you’ve also got your government bonds and things like index-linked and investment grade corporate bonds. So there’s quite a lot of variety and they all do different things at different times.”
Strategic bond management with Enable’s IFA’s could help you make the most of your wealth.
Recent figures from the Investment Management Association for March however showed fixed income was the most popular asset class as a whole for the seventh month in a row with net retail sales of £660m. Also, the IMA Sterling Strategic Bond sector was the best selling of all IMA sectors for the month.
The sector, which contains funds that invest at least 80 per cent of their assets in sterling denominated fixed interest securities - or securities that are hedged back to Sterling - recorded net retail sales of £366m, the highest figure since April 2011, and significantly above the monthly average for the previous 12 months of £211m. Investor inflows into these funds mean it is the second largest fixed income sector at £25.6bn, second only to the £52.8bn Sterling Corporate Bond sector.
Andrew Sutherland, head of credit and aggregate at Standard Life Investments and manager of the £92.1m Standard Life Investments Strategic Bond fund, says most people think of bonds as having very few differences but he adds: “There’s a vast amount of difference in terms of risk and performance in bonds. You’ve got high yield which is very cyclical and high yielding, but you’ve also got your government bonds and things like index-linked and investment grade corporate bonds. So there’s quite a lot of variety and they all do different things at different times.”
Strategic bond management with Enable’s IFA’s could help you make the most of your wealth.
Wednesday, 9 May 2012
Enable train for their 5 countries in 5 days challenge
South Asian millionaires increasing - do you need to revise your investment options?
A BRICdata report has recently suggested that the wealth management market for South Asian millionaires living abroad will increase in the next four years. As many as 21.6 million persons of Indian origin (PIO) and non-resident Indians (NRI) are currently living overseas, with the largest proportion of millionaires residing in the US. This is followed by the UK, the United Arab Emirates, Canada and Hong Kong.
The compound annual growth rate (CAGR) of the wealth management market for NRI millionaires living abroad rose to 9.4 per cent over the 2007-2011 study period. BRICdata also expects the total wealth of these individuals to increase by another 6.9 per cent by 2016.
The number of non-resident Pakistanis (NRP) living abroad reached eight million last year, according to the report, with the majority of millionaires living in the UK, followed by United States, the Persian Gulf and Canada. The Persian Gulf counties also hold the largest number of Bangladeshi millionaires, with 5.4 million non-resident Bangladeshis (NRB) currently live away from their home country. With 2.5 million persons of Sri Lankan origin and non-resident Sri Lankans (NRSLs) living abroad last year, Singapore had the highest proportion of millionaires.
It would seem that the South Asian markets are serving their entrepreneur’s well. If your wealth needs managing the Asian markets will probably prove vital for future growth. Enables IFA’s are always happy to talk through your investment options.
It would seem that the South Asian markets are serving their entrepreneur’s well. If your wealth needs managing the Asian markets will probably prove vital for future growth. Enables IFA’s are always happy to talk through your investment options.
Wealth Management - Fit for fulfilling your potential?
Part of any rounded picture in life is your health - key to any Wealth Management strategy is how you want to live your life. In a fit of madness one of our team at Enable decided to join the Isabel Hospice team and cycle 5 Countries in 5 days (500miles!!). The event is taking place from the 12th to the 17th of June 2012 in which time you will be able to witness a middle aged, balding, overweight IFA, passing through the UK, France, Belgium, Germany and ending in Holland.
Providing for the end of your life is vital and Hospices provide the ultimate place of dignity to end your days which is why they are so vital to fund. The Isabel Hospice was founded in 1982 by a number of dedicated people inspired by Isabel Last who herself had cancer. It was registered as a charity in 1983 and works throughout the eastern Herts area covered by Broxbourne Borough Council, East Herts District Council and Welwyn/Hatfield Council. The philosophy of the Hospice has always been to affirm the uniqueness of the individual and to focus on the highest possible quality of life for each patient in our care. Isabel Hospice is an independent body and is supported mainly by donations from the public. All care given by the Hospice is free to their patients. Part of living is giving and Enable are proud to have the opportunity to raise funds for such an important organisation. If you want to support Mike just follow his fundraising link.
Providing for the end of your life is vital and Hospices provide the ultimate place of dignity to end your days which is why they are so vital to fund. The Isabel Hospice was founded in 1982 by a number of dedicated people inspired by Isabel Last who herself had cancer. It was registered as a charity in 1983 and works throughout the eastern Herts area covered by Broxbourne Borough Council, East Herts District Council and Welwyn/Hatfield Council. The philosophy of the Hospice has always been to affirm the uniqueness of the individual and to focus on the highest possible quality of life for each patient in our care. Isabel Hospice is an independent body and is supported mainly by donations from the public. All care given by the Hospice is free to their patients. Part of living is giving and Enable are proud to have the opportunity to raise funds for such an important organisation. If you want to support Mike just follow his fundraising link.
The Secret Of Long-Term Financial Success
As Independent Financial Advisors, Wealth Management is key to our activities at Enable. As with all other IFA’s we are always looking for the best way to make returns over the medium term. At Enable we always advocate diversity and learning form others success and mistakes. One fund manager who also prefers not to put all her eggs in one basket is Margaret Lawson, co-fund manager of the SVM UK Growth Fund, a 12-year-old portfolio.
Lawson has seen the fund endure a difficult 2011, when it fell 8.2 per cent (A share class), falling behind the FTSE All-Share Index of UK stocks by 4.7 per cent, but over the longer term, this is a strong fund. Since its launch in March 2000, the fund has delivered a cumulative performance of 74.8 per cent, beating the index by 44.6 per cent. (Lipper data at 29 February, 2012.)
One of the “unique selling points” of a fund like this is how its managers divide it into three categories: its “core” holdings, “tactical” holdings and “alpha kickers”. A “core” segment holds the low-risk, robust selection of stocks that are rotated infrequently; a “tactical” segment contains stocks that are chosen for their exposure to shorter-term trends, such as changes in the economic cycle, and “alpha kicker” segment, which gets its returns from firms undergoing significant change and where shares often trade at a discount and offer potentially large returns.
Enable can see the benefit of being able to adjust the share that these three segments have of the total fund so that performance can be maintained and losses curbed in different economic conditions: recession, strong growth or sluggish growth, our IFA’s are always available to discuss your Wealth Management strategies.
Lawson has seen the fund endure a difficult 2011, when it fell 8.2 per cent (A share class), falling behind the FTSE All-Share Index of UK stocks by 4.7 per cent, but over the longer term, this is a strong fund. Since its launch in March 2000, the fund has delivered a cumulative performance of 74.8 per cent, beating the index by 44.6 per cent. (Lipper data at 29 February, 2012.)
One of the “unique selling points” of a fund like this is how its managers divide it into three categories: its “core” holdings, “tactical” holdings and “alpha kickers”. A “core” segment holds the low-risk, robust selection of stocks that are rotated infrequently; a “tactical” segment contains stocks that are chosen for their exposure to shorter-term trends, such as changes in the economic cycle, and “alpha kicker” segment, which gets its returns from firms undergoing significant change and where shares often trade at a discount and offer potentially large returns.
Enable can see the benefit of being able to adjust the share that these three segments have of the total fund so that performance can be maintained and losses curbed in different economic conditions: recession, strong growth or sluggish growth, our IFA’s are always available to discuss your Wealth Management strategies.
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