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Digital Subscriptions > Portfolio Adviser > PA guide to income, Sep 17 > HAPPY HUNTING

HAPPY HUNTING

Portfolio manager Ben Pakenham sets out the case for bond funds as a vehicle for stalking income

Aberdeen Asset Management

In the 10 years since the global financial crisis, bond funds have been much maligned as an asset class to source income from.

Given how far yields have fallen in that time, perhaps this is not surprising. At present, five-year German bunds yield a negative 30 bps, while five-year UK gilts are yielding 0.5%.

However, like equities, not all bond funds are the same and one area that has proved to be a fertile hunting ground for income is the European high-yield sector.

Stable returns

Ben Pakenham, co-manager of the Aberdeen Global – Select Euro High Yield Bond Fund, says the sector has appeal over both the long and short term.

“Over the long term, the sector’s risk-adjusted returns speaks for itself,” he says. “The market really came about with the creation of the euro in 1999, and in that time the annualised return has been about 8%, which is not far off equity returns but with much lower volatility.”

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About Portfolio Adviser

This month’s guide to income assesses the landscape for incoming-producing asset classes, some 10 years on since the onset of the global financial crisis. Morningstar’s Richard Whitehall looks at where the best opportunities for income-based investors currently lie; be it equities, bonds, or somewhere else, while we ask advisers and wealth managers where they are currently hunting for yield. Funds profiled include RWC Enhanced Income and Aberdeen Global - Select Euro High Yield Bond.
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