corporate bonds, New Star Sterling Bond,

A fund taking an aggressive view of a tame sector

13.10.2006

by Eoin Gleeson

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The UK corporate bond sector is not renowned for the excitement it brings, but Phil Roantree’s aggressive investment approach has earned his New Star Sterling Bond fund a reputation among advisers as a “persistently good” performer, says What Investment. Although the bulk
of the fund is held in investment-grade corporate bonds, Roantree also maintains small holdings in unrated and high-yield bonds. As financial adviser Brian Dennehy tells The Daily Telegraph, it is this “trading mentality” that has seen the fund beat its benchmark over the past five years, returning 31.9% against the sector average of 25.1%.

Roantree’s success stems from his focus on identifying assets with unfairly low credit ratings and being prepared to hold or buy those that others may consider sub-investment, in the expectation that they will be re-rated in the future, says Citywire.

Roantree, who has managed the fund since 1994, is “more independent-minded than his peers”, according to Tim Rowan in the Daily Mail. This approach has served him well in a sector in which managers tend to “say the same things”. Justin Harper, in the same piece, adds that current concern about high inflation will put pressure on bond prices. But by the end of the year, the worry could easily turn to deflation as concerns grow over global growth. This will favour high-quality corporate bonds over the high-yielding variety – and Roantree has the flexible approach to benefit. In Brian Dennehy’s estimation, he is well placed to take advantage of “the opportunities that are now emerging”.

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New Star Sterling Bond’s top ten holdings

Name of holding % of assets

Pearson  7% 27/10/2014                             1.60
Treasury 5% 2025                                      1.56
Scottish Widows 5.125% (CALL 2015)            1.48
Treasury 4 3/4% 2020                                 1.44
Hutchison Ports Fin. 6.75% 7/12/15               1.33
Portman BS 7.125% 2011/16                         1.31
Treasury 5% 2012                                       1.29
Ass. British Ports 6.62% 7/08/08                    1.27
Royal London 6.125% (CALL 2015)                  1.25
Commerzbank 5.905% 12/04/18                     1.24