Investor 91

THE INVESTOR CENTRE

All information correct as at 30 September 2016

merging market corporate debt

had another positive quarter.

However, after a relatively robust July

and a quiet, albeit positive month in

August, investors began paring back

risk in September as attention turned

to global rates and central bank policy.

Nevertheless, the supply-and-demand

dynamic for the asset class remains

supportive, underpinned by the global

search for yield.

Our portfolio produced positive

returns, bene ting from the good

performance of government-owned oil

and gas companies, notably in Latin

America.The ongoing political and

economic stabilisation was also

bene cial for companies based there.

We remain constructive on the

market but, given the strong returns

this year, feel it prudent to take pro ts

on some

positions.We

have also

increased cash balances to take

advantage of the expected pick-up in

new issuance in Q4 and have cash

ready to deploy into any compelling

opportunities in the primary market.

We believe the overall risk tone

over the coming months will be

dictated by global central banks.

BLUEBAY

Joint manager: Strategic Income

Portfolio produced positive returns

based on strong oil and gas holdings

Supply-and-demand

dynamic for asset class

remains supportive

igh-yield assets performed well

into Q3 with seven straight

months of positive performance

throughAugust.While high-yield

default activity picked up in July, it

remained minimal in August and

September.High-yield new issuance

was active inAugust and September.

The fundamental and technical

backdrop of high-yield credit remains

strong, driving performance.One of

the quarter’s largest contributors was

a high-yield bond position in Sprint

Corp.The company announced strong

quarterly earnings, growing its

phone internet additions while taking

costs out of the business.A distressed

position in Energy Future Intermediate

Holdings detracted for the quarter

due to depressed Texas Power prices

and weaker natural gas prices.

The US economy should continue

to growmodestly but macro issues

(the Chinese economy, potential

missteps by global central bankers, the

US presidential election) give us pause.

We have looked to reduce risk by

upgrading the portfolio’s credit quality

and placement within the capital

structure, as well as raising cash levels.

BRIGADE

Joint manager: Diversified Bond

Strong performance was helped by

investment in Spirit Corp

High-yieldperformed

wellwithsevenmonths

of positiveperformance

he stock market recovered from

the shock of the EU referendum.

Strong rhetoric, followed by

signi cant action from the Bank of

England, calmed fears of an early

fallout within the UK economy.This

contributed to the signi cant

rebound in equity markets with

cyclicals rallying ahead of more

defensive areas of the market.

The fund delivered consistent and

positive absolute returns in Q3 while

retaining and reducing exposure to

broader equity markets.The largest

contribution came fromARM

Holdings,which was acquired by

Japanese conglomerate SoftBank.

Financials performed well,with 3i

Group reporting good progress across

its portfolio,while buy-to-let lender

Paragon Group bene ted from the

backdrop across the UK housing

market being less bleak than feared.

Short positions within industrials and

basic materials struggled given the risk

on rally,despite little change to weak

fundamentals and challenging

industry dynamics.

Attention is turning to scal policy

to aid nancial markets but we believe

such action could trigger volatility at

both the market and the stock level.

BLACKROCK

UK Absolute Return

Portfolio delivered consistent

positive returns over the quarter

Signi cant action from

the Bank of England

calmedBrexit fears

Nigel Ridge

Donald Morgan III

Polina Kurdyavko

THE INVESTOR