Copia Capital Management’s (Copia) Select: Short Duration Bond Portfolio (SDBP) has passed its one year anniversary, delivering positive returns to advised clients seeking a low risk, attractive yield alternative to cash.
SDBP was launched in October 2022 to take advantage of dislocations in fixed income markets resulting in short-duration bonds delivering attractive returns with low risk. Despite continuing high levels of volatility in the bond markets, the portfolio has delivered a 5.5% return to investors since launch, with strong performance on both an absolute and relative basis.
| Cumulative Returns as of 31 October 2023 | |||||
| 1M | 3M | 6M | Year to date | Since inception (31/10/2022) | |
| Copia Select Short Duration Bond Portfolio | 0.4% | 1.4% | 1.7% | 3.8% | 5.5% |
| IA Sterling Strategic Bond | -0.4% | -1.0% | -1.4% | 0.6% | 3.2% |
| IA Short Term Money Market | -0.4% | 1.2% | 2.3% | 3.4% | 3.8% |
| Global Aggregate Bond Index | -0.7% | -2.7% | -3.4% | -0.6% | 0.5% |
| Global Aggregate Short Term Bond Index | 0.4% | 0.0% | 0.5% | 2.6% | 4.3% |
| UK Government Bond Index | 0.1% | -1.0% | -4.3% | -3.8% | -5.7% |
| UK Government Short Term Bond Index | 0.5% | 1.8% | 0.9% | 1.5% | 1.7% |
Source: Copia Capital and FE Analytics
SDBP consists purely of short duration bonds, held primarily in high quality investment grade bond funds which are less sensitive to interest rate movements, which is particularly useful in the current uncertain macro environment. These are supported by satellite holdings in short duration high yield and short duration emerging market debt.
Robert Vaudry, Managing Director of Copia Capital, said: “We developed the short duration bond portfolio to take advantage of the significant sell-off in bonds we saw in 2022. Since inception the portfolio has generated steady and consistent returns, outperforming peer groups for the asset class and standard bond benchmarks during a period of challenging returns for the wider fixed income market, as well as achieving stronger returns than money markets.
“Although cash returns have improved over the last 12 months, we believe the investment opportunity within this section of the bond market remains attractive, especially for clients looking for low-risk steady returns.”
The strategy continues to be targeted at investors who may be sitting in cash and are concerned about negligible yield but are looking for a low-risk, steady return. It has not been designed as a replacement for multi-asset mandates, but as one way to obtain a higher yield in current markets – above that available on cash – without taking excessive risk.
The short-dated bond portfolio has a yield to worst (YTW) of 6.4%, the lowest potential yield that can be received on the bonds (assuming the issuer doesn’t default), compared to money market funds currently offering around 5%. The YTW return is from both capital appreciation of the bonds as they get to their issue price of 100, and the coupons that are being distributed.
The fund has no exposure to equities, alternatives or any complex investments such as derivatives.
For financial advisers only. Not to be distributed to, nor relied on, by retail clients. Past performance is used as a guide only. It is no guarantee of future returns. Your investment can go up and down and you may not get back the full amount invested.
