“No AT1. No CCC: Bond veteran Roberts’ new fund favors safer debt.”

(Bloomberg) – David Roberts, a bond market veteran who built a multibillion-dollar fund from scratch over the past 27 years, is cutting back on his retirement savings and going back to buying bonds. His approach is “No AT1. No CCC.”

The co-manager of NedGroup Investments’ Global Strategic Fixed Income Fund, which was officially launched on Tuesday, reiterated the no-go zone in a phone interview with Bloomberg. For Roberts, who started managing assets in the 1990s and spent 14 years at Aegon Asset Management, that means sticking to the basics and avoiding near-default CCC-rated bonds and additional Tier 1 bonds (the riskiest type of bank debt). Avoid it.

“The current market is similar to the boring market from 2000 to 2010, so you should buy as much as you can and just own it,” Roberts said. “Through the core foundations of the portfolio, you can get a 5% to 6% yield with a fair degree of certainty.”

His comments come as yields in safe areas of the bond market have risen in recent weeks as investors temper expectations for aggressive rate cuts from central banks. The interest rate paid on high-quality corporate bonds around the world is just under 5%, about a percentage point below last year’s peak but above the typical level at the start of the year.

NedGroup’s portfolio is about 50% investment-grade bonds, 30% sovereign debt, and about 15% invested in the highest-rated portion of the junk bond market, Roberts said.

Roberts returns to the market after more than four years as head of global fixed income at Liontrust Asset Management, following an interim retirement in the summer of 2022. He will co-manage the fund with former Artemis money manager Alexandra Ralph.

The areas Ned Group’s funds eschew can offer huge returns despite high risks. An index of CCC-rated bonds (junk bonds with a high risk of default) returned about 18% in 2023, about twice the return of high-quality corporate bonds, according to data compiled by Bloomberg. Meanwhile, AT1 has been making a comeback since $17 billion worth of Credit Suisse notes disappeared a year ago.

Read more: Junk bonds stand out among global bond losses

Still, these risky bonds are unlikely to make it into a portfolio. The portfolio aims to outperform the Bloomberg Global Cumulative Total Return Index, which is hedged in US dollars, for three consecutive years.

“Given the opportunity in core fixed income, we want to focus on that part of the market and leave everything else to the sexier powers,” Roberts said. “We understand that our clients are only part of the solution. Some bond managers have strayed too far and tried to provide the entire solution. ”

(Updates first paragraph with Roberts’ experience.)

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