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Bryn Jones: The bonds that make it into my World Cup starting XI

22 June 2014

Bryn Jones, manager of the Rathbone Ethical Bond fund, combines his love for the World Cup in Brazil and fixed interest to put together a portfolio of 11 bonds securities with differing risk profiles.

By Bryn Jones,

Rathbones

If you do not like football or bonds, switch off now.

ALT_TAG The world’s greatest tournament (and silly season) is now well underway, bringing back memories of yesteryear. The World Cup 1982 remains my favourite, filled with the brilliance of Brazil’s Zico and Socrates, France’s Platini and Italy’s Rossi – players I tried to emulate in the playground, running around in a Peru kit...

The playground also gave me and my brother our first lessons in trading and liquidity, the challenge being to complete the Panini World Cup sticker book. The closer I got to filling in the book, the tighter became the liquidity.

Does anything really change? Well certainly not my love for the beautiful game.

Wind forwards a couple of decades at least, and just like the ideal team, a healthy portfolio should embody strong defensive capabilities and flair on the attack. So keeping with the spirit of these sacrosanct times, here are my 11 play(er)s that should fit this thesis – and my traditional 1-4-2-4 formation – nicely.

Starting with goal, I’d place the EIB 0% 2028. This Gordon Banks of bonds has robust defensive characteristics, and enjoys a ‘taller’ yield than other EIB bonds.

Looking to central defence, I’d play that stalwart of covered bonds, Lloyds 5.125% 2025. Alongside that, I’d use Fresh Finance for Social Housing (8.569% 2058) – a high quality, fixed-rate residential mortgage-backed security.

On the left back, my modern-day defender, up and down the tracks on the outside (pardon the pun), would be railway securitisation, Eversholts 6.359% 2025. And on the right back, I’d place a nice solid defender, built like bricks and mortar (pun number two) – housing association Quadrant Housing 7.93% 2033.

Now onto the Rooney, Sterling, and Welbeck of my midfield. Come on down BPCE 5.25% 2029, a French financial company, which gives us the excitement of the French football team and the solidity required from a midfielder.

I’ve a relative unknown in attacking midfield, in the form of Coventry Building Society, which has a very attractive yield and a highly defensive balance sheet. I believe this is the most undervalued midfielder available to me right now, and have no intention of transferring it.

Assicurazioni Generali 6.269% 2026 provides some pizzazz in the form of a traditional Italian winger, complemented on the opposing wing by Australian insurer QBE 6.75% callable 2041, the Harry Kewell of the portfolio.

And to secure some really good attacking football, I’d put in steady goalscorer, Beazley 7.25% 2016 (not to be confused with Peter Beardsley) – an insurance bond which consistently achieves results. Wales might not have made it to the finals, but Principality Building Society, a floating rate note 2016, is definitely my Gareth Bale.

One final point, I will happily make a market for anyone who has, er, “kids” collecting for this year’s album. “We” still have a few to complete, and my “brother’s kids” have a few left too…


Bryn Jones has been manager of the £179m Rathbone Ethical Bond fund since November 2004.

Performance of fund and sector over 5yrs

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Source: FE Analytics

It is a top quartile performer over one-, three- and five-year periods, and is also ahead of the sector since Jones took over. The fund has been consistently more volatile than its peers, however.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.