“Bond yields are on the rise, but generally they do not travel up in one go and there will be ebbs and flows. Short-end European bonds are a key play for us – the global recovery is coming through, and, while the US has been the engine in recent years, we are now seeing Europe picking up.”
Husselbee continued: “We are keen on high yield and investment grade. It is a sign of a recovering economy – high yield has been tarnished recently, particularly in the US energy sector, but there are still some opportunities in the European space.”
Husselbee’s exposure to the bond space includes positions in the Axa US Short Duration High Yield Bond and L&G High Income funds.
Other plays that he is employing to nullify volatility are hedging and absolute return – the latter of which he is accessing via long/short industry newcomer Sanditon UK Select – and some extra cash exposure.
“When you feel that you have reached your limit on equities and do not want to add more bonds then you use cash as a way to preserve capital,” said Husselbee.
“However, cash yields very little, and while inflation is low you are almost locking yourself into negative yield. Therefore using absolute return and hedge funds has been an alternative way to negate risk.
“Our cash levels are slightly higher than average, around 5% as opposed to 2-3%. However, it would be higher were we not using the absolute return and hedge funds.”
