Fidelity’s Spreadbury snaps up Italian and Spanish debt

Fidelity manager Ian Spreadbury has snapped up some Italian and Spanish sovereign debt, as well as corporates in both regions, to provide his funds with some extra yield.

Spreadbury, running the group’s MoneyBuilder Income and Strategic Bond funds, said there was an opportunity in both Spanish and Italian government debt thanks to the attitude of politicians in Europe.

“The resolve in Europe is strong to keep these countries [like Greece] in the eurozone,” he said.

“The problem I have is the level of uncertainty in Europe, and if Greece was to leave that could cause more volatility.

“But clearly the yields on those bonds are pretty high relative to what you get in core bonds, and I do hold both sovereign and corporate bonds in peripherals like Spain and Italy.”

Yields on both Italian and Spanish government debt have come in sharply in recent months following liquidity operations in Europe and statements of support from EU leaders.

Italy’s 10-year debt currently yields 4.9%, while Spain’s yields 5.6%. This is well below the danger zone levels above 7% where their yields stood at the height of the crisis.

Elsewhere in the portfolios, Spreadbury remains in defensive mode, focusing on areas such as telcos and utilities where he has been for much of the year.

Peers have taken on more risk this year in the search for yield, and as a result Spreadbury’s funds have lagged the returns being achieved by the sector.

In the UK Investment Management Association Corporate Bond sector, Spreadbury’s MoneyBuilder Income fund has delivered 11.5% over the last 12 months, behind the sector average return of 13.4%.

His Strategic Bond fund has returned 12.1%, compared to the sector average return of 13.2%, although over longer time periods his funds remain among the best in both sectors.


This article was first published on Investment Week

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