Stratton Street bond fund returns double sector average
The New Capital Wealthy Nations Bond Fund, co-launched by Stratton Street Capital and EFG Asset Management, is celebrating its third birthday with a return of 31%, double the average three-year returns of the sector (according to Trustnet).
This outperformance is attributed to the fund’s unique approach at the time of the launch compared to its market peers.
Its strategy is to invest in global investment grade bonds and avoid bonds from indebted countries that might be unable to pay the money back.
As a result of this conviction, the fund has never held debt issued by Greece, Spain, Portugal or Ireland, despite the fact that at the time of its launch Greece and Portugal had stable ratings from Moody’s, A1 and Aa2, respectively.
Instead, the fund has been buying into countries that have net external assets, and were borrowing sustainable amounts to grow.
A successful example is Qatar, Aa2 rated, which issued sovereign debt in November 2009. The fund bought the 2040 maturity at a price of 102.6, yielding 6.3%. Since then its price rose to 132.5, while yields dropped to 4.41%. Thus, in addition to the 6.4% coupon rate, the bond is also providing a capital gain.
The successful strategy and attractive returns have drawn the attention of investors to the fund. Since launch, its size has reached the $1bn threshold.