All this week we bring you the best income opportunities across the globe, as picked by top fund managers, professional investors and our own stock and fund analysts as part of Morningstar’s Guide to Finding Investment Income.
Fidelity MoneyBuilder Income
We have a high opinion of lead manager Ian Spreadbury and comanager Sajiv Vaid, given their backgrounds and long-term portfolio management experience, says Morningstar fund analyst Carlos Lucar.
The long-established investment process is driven by the managers’ top-down views, while they rely heavily on Fidelity’s well-resourced multidisciplinary research platform for bottom-up idea-generation and execution. The managers have retained a cautious stance during the past few years based on their expectation of slow global economic growth.
Vanguard UK Government Bond Index
Vanguard UK Government Bond Index offers passive exposure to the all-maturity market of UK government conventional bonds. This index fund can work as a core fixed-income building block in a UK-centric portfolio.
This fund is an excellent tracker, says Morningstar’s Jose Garcia Zarate. Measured against the GBP Government Bond Morningstar Category, the fund routinely ranks amongst the best performers. Measured against a peer group of trackers, the fund also ranks amongst the best.
The fund management process is geared towards delivering the index's returns at the minimum possible cost. This fund tracks an index with a small number of components from a highly liquid market. This allows for easy full replication, with the manager’s key objective to minimise transaction costs. We value positively the fact that the fund’s managers are also traders. This, in our view, helps them to cement their knowledge of the markets they track while also keeping trading costs tightly in check.
Invesco Perpetual Corporate Bond
An experienced manager line-up and a tried-and-tested process drive our conviction here, says Lucar. The fund had been run by veteran duo Paul Read and Paul Causer, co-heads of Invesco Perpetual’s fixed-income team, since its launch in 1995. Experienced investor Michael Matthews, who has been part of the team since its start in 1995, was named comanager here in 2013.
The approach is benchmark-agnostic, with no formal limits on sector weightings and the latitude to invest up to 20% in high yield. The managers' macroeconomic outlook guides the portfolio's positioning, though they are also pragmatic in identifying opportunities outside of the central top-down scenario. That kind of flexibility can be risky in the wrong hands, but the managers have adeptly used it to investors' advantage over the long term.
