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Model Portfolio: 28 January 2011
Model Portfolio : 28 January 2011
The first valuation of 2011 see a small increase in the bottom line for the Fixed Income Investor model portfolio. This can largely be put down to the usual positive effect of coupons, accrued interest etc rather than any overall capital gains.
Some holding have performed well, but our positions in senior bank debt are feeling the heat. Investors are continuing to shun this asset class and prices are falling accordingly. Of course, as prices fall, so value increases and the 6-7% YTMs now offered for senior bank debt are arguably good long-term value. Short term price action is another matter. I would be tempted to buy more bank debt, but we are now overweight the sector - indeed, I will look to lighten up into a bounce.
My cash position is low, making it tricky to buy any new issues or other opportunistic trades. However, the portfolio has some over-par positions in the 2-3 year maturity band (M&S and Next), and a profit can be taken here if needs be.
Given the current concerns on inflation, I have moved around 12% of the portfolio into index-linked assets. Inflation is picking up so that should have worked. However, the RBS index-linked issue is failing to perform and this is disappointing - index linked gilts of the same maturity are roughly flat over the period. It would seem that the RBS bond is drifting on the back of the general negative sentiment towards senior bank debt.
Pibs, prefs etc are performing well. This asset class often shows a positive correlation with the equity market and a general shift towards a risk-positive approach is helping their cause.