F&C’s Luis cuts high yield exposure

F&C’s Fatima Luis is planning to reduce her exposure to high yield names by at least 10% in both her £125m Extra Income Bond and £225m Strategic Bond funds.

Luis believes the best gains have now been made in this area, although a few opportunities still remain.

"From our perspective the ‘opportunity of a lifetime' has largely passed by and arguably we are now in a position where valuations are taking too sanguine a view of both default risk and the economic outlook from here," says Luis.

"Throughout the post-March rally we adopted an active approach, locking in gains across a range of our riskier positions.

"Many of these had recovered to around par following periods earlier in the year where they were trading at around half that value.

"Our emphasis on well funded businesses means we remain comfortable with the vast majority of our holdings but with prices having recovered so strongly the risk/reward pay-off is looking less compelling".

Luis currently has just over 35% of the Extra Income Bond fund invested in high yield, while Strategic Bond has around 30% invested in the asset class.