The value of investments and any income from them can fall and you may get back less than you invested.

MI Select Bond fund

The MI Select Bond fund has been designed to meet a dual objective. It aims to consistently outperform our blended benchmark, a combination of the FTSE Gilts All Stocks and Markit iBoxx GBP Corporate Bond All Maturities indices with a 60%/40% weighting and provide diversification within a balanced portfolio.

Our approach has been based on identifying main risk exposures such as interest rate and credit risks of our benchmark and then selecting fund managers who have a successful track record of generating alpha managing these risks.

There are two main sleeves within the fund managed by four individual fund management teams. Each sleeve corresponds with the specific part of the blended benchmark, the gilt index and sterling-denominated investment grade corporate bonds. Insight and Deutsche asset management are managing the gilt sleeve, where primary risk factor is duration i.e. interest rate risk. Robeco and Pimco investment teams are responsible for the corporate bond sleeve. The latter is also driven by the moves in interest rates but the main source of alpha comes from the credit risk the fund managers are taking within their portfolios.

The gilt strategy, managed by Insight, is managed to generate alpha from interest rate strategies but also has a limited flexibility to enhance returns through investments in inflation linked bonds, foreign government bonds, including emerging markets and corporate bonds. The fund is managed Harvey Bradley, a member of the Global Rates team, a specialist fixed income unit at Insight who successfully manage a number of government bond funds. The team’s gilt fund which served as a prototype for the strategy employed by MI Select Bond fund has a long successful track record of generating an outperformance over the gilt benchmark in the challenging markets.

Deutsche Asset Management (DWS) looks after a passive index-linked gilt strategy, which aims to replicate the performance of the FTSE Index-Linked Gilts Index. The DWS is one of the largest ETF providers in Europe and have an extensive experience of managing passive mandates across all asset classes, including fixed income.

Sterling investment grade allocation is managed by Ketish Pothaligham, a senior UK Credit portfolio manager based in Pimco’s London office. Ketish have been managing Pimco UK Corporate Bond fund since 2012. The fund outperformed its benchmark (Markit iBoxx GBP NonGilts) in every year since Ketish took over the fund. The fund manager constructs a diversified portfolio that reflects Pimco’s long term and tactical macro views with an emphasis on sector and stock selection, which are the main alpha sources for the fund.

The global credit strategy is managed by Robeco, a Dutch asset manager, headquartered in Rotterdam. The strategy inside the MI Select Bond fund is based on the Robeco’s flagship Global Credits fund, but with more flexibility. This allows the fund managers to exploit market inefficiencies in parts of the market inaccessible to a daily trading open-ended fund. Victor Verbek, the lead fund manager responsible for the global credit strategy within the IM Select Bond fund employs a unique investment process which combines traditional top down and bottom up approaches with behavioural finance and quantitative credit analysis, the effectiveness of which is demonstrated by the fund’s consistent outperformance.

Given that one of the main objectives of MI Select Bond fund is to provide diversification through the full business cycle we decided against adding a standalone high yield or emerging market debt strategy which historically exhibited higher correlation to equity. Current mix of strategies, however, have sufficient flexibility to take opportunities in those sub asset classes should they present themselves and will continue to serve as a core fixed allocation through ups and downs of business cycles.

Shakhista Mukhamedova, CFA CAIA
Fund Research Analyst
The value of investments can fall and you may get back less than you invested.

If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset.

Past performance is not a guide to future performance.

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