Fraser Lundie, co-head of Hermes Credit, examines the trend towards a broad spread of holdings in fixed income funds, as managers become less willing to run high conviction strategies.
Implementing a ‘high-conviction approach' is a common assertion among credit fund managers. But what is promised is not always delivered: intentions to run concentrated portfolios are being compromised by the large sizes of funds, and mandate structures that do not account for structural changes in the market. When seeking a high-conviction manager, investors will typically assess the concentration of a portfolio. To test managers' current levels of conviction, we analysed the percentage of portfolio assets invested in each fund's 10 largest positions. A dramatic picture emerged. ...
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