Following his arrival from Merian Global Investors, Lloyd Harris, head of fixed income at Premier Miton Investors, took over as lead manager of the Premier Miton Corporate Bond Monthly Income Fund in August 2020.
Presenting the Premier Miton Corporate Bond Monthly Income Fund
We look at the portfolio from five angles with fund manager Lloyd Harris to see what makes it different to its peers and why high-quality credit can provide genuine diversification to equities.
Asset class
Strategy
Philosophy
Diversification
Team
FOR PROFESSIONAL INVESTORS ONLY
IMPORTANT INFORMATION
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To ensure a focus on high quality credit, the portfolio has a maximum exposure to BBB bonds of 50%, and the average credit quality is A-rated.
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With interest rates on the rise globally but company fundamentals improving, Lloyd Harris, head of fixed income at Premier Miton Investors and lead manager of the fund, says a highly active strategy in high quality corporate bonds provides something genuinely different to holding equities.
“Since March 2020, many investors have found that their bond funds have been quite correlated to the performance of equities and this is something we seek to avoid,” says Lloyd.
50%
exposure to BBB bonds
Portfolio has maximum
A-RATED
Average credit quality
“The focus on downside protection drives the high quality nature of the fund,” says Lloyd.
The fixed income team at Premier Miton follow three core principles in managing the fund; investing in high quality, stable and investment grade companies, a focus on downside protection and a highly active strategy to give investors a genuine diversification to equities.
Between 80-140 holdings.
To provide downside protection the fund also takes active duration positions, with duration within +/- two years of the ICE BofA Sterling Non-gilt Index.
80-140
The fund holds
holdings
Differentiator
Premier Miton also maintain a Responsible Investing Policy in which the consideration of Environmental, Social and Governance (ESG) factors alongside financial factors are embedded in investment decisions.
Fund size
The investment philosophy of the fund is focused on adding incremental value through marginal gains.
This leads to a highly active approach, in which turnover tends to be typically high.
“There is no need for credit investors to be stamp collectors,” says Lloyd. Instead, he says the team focus on looking for price anomalies within the market, and when these anomalies normalise they take profits and move on.
£140.7M
*Source: Fidelity International, as at Mar 2021.
2.8%
Distribution yield
as at 28 May ’21
C Income share class as at 28 May ’21
Exposure to high-yield bonds
Given the high quality nature of the credits the fund is invested in, the portfolio can provide a negative correlation to equities.
“With quality comes that diversification,” Harris says. “The less credit risk in a fund, the less it is likely to behave like equities.”
As at the end of March 2021 only 46.7% of the portfolio was held in BBB-rated bonds or below, namely those bonds which are considered lower quality in the investment grade universe and therefore most equity-like.
4.5%
The fund also has a very low exposure to high-yield bonds, accounting for just 4.5% of the portfolio at the end of March, while 89.0% was held in investment grade bonds.
as at 31 Mar '21
89.0%
Exposure to investment-grade bonds
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With close to 20 years in fixed income markets, Lloyd took on his first managerial duties at the end of 2015 when he became lead manager of the Merian Corporate Bond Fund. Lloyd launched the Merian Financials Contingent Capital Fund in August 2017 with Rob James and became lead manager of the Merian Monthly Income Bond Fund in February 2018.
Harris manages the fund alongside Simon Prior, who also joined from Merian and co managed the Merian Corporate Bond and Merian Monthly Income Bond funds with Harris.
Alongside Harris and Prior, the Premier Miton fixed income team includes Rob James - who also joined from Merian - managers Chun Lee and Hoy Wan, and two credit analysts.
James, who co manages the Premier Miton Financials Capital Securities Fund, has 30 years of experience as a financials equity analyst and moved over to the credit desk in 2017 when Merian launched the Merian Financials Contingent Capital Fund.
Harris says: “The team has rich financials experience which is very important as financials typically represent around 40% of corporate bond indices. Simon is an insurance expert having worked on an insurance company treasury desk and Rob has analysed financials for decades.”
The value of investments may fluctuate which will cause the value of a portfolio to fall as well as rise and investors may not get back the original amount invested. Government and corporate bonds generally offer a fixed level of interest to investors, so their value can be affected by changes in interest rates. When central bank interest rates fall, investors may be prepared to pay more for bonds and bond prices tend to rise. If interest rates rise, bonds may be less valuable to investors and their prices can fall.
Risks
Disclaimer
For Investment Professionals only. No other persons should rely on any information contained in this document. Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice. Reference to any particular stock or investment does not constitute a recommendation to buy or sell the stock / investment. All data is sourced to Premier Miton unless otherwise stated. Persons who do not have professional experience in matters relating to investments should not rely on the content of this document. For your protection, calls may be monitored and recorded for training and quality assurance purposes. A free, English language copy of the fund’s full prospectus, the Key Investor Information Document and Supplementary Information Document are available on the Premier Miton website, or you can request copies by calling us on 01483 306090. Financial Promotion issued by Premier Miton Investors. Premier Portfolio Managers Limited is registered in England no. 01235867. Premier Fund Managers Limited is registered in England no. 02274227. Both companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE. 003164/200521
