“With the banks reluctant to lend, many companies have turned to the credit markets to raise liquidity. The high yield market has been seen as a popular source of funding for many corporations,” he says.
“With fundamentals improving, spreads have tightened as default risk declines. We do, however, believe that we are nearer to the end than the beginning of this story and we are starting to shift our emphasis towards total return bond funds that can hedge out duration and interest rate risk.”
Outside of the UK, Husselbee says the theme of tightening liquidity is being played out at varying speeds.
“The World’s largest economy, the US, is preparing to withdraw quantitative easing as their recovery gains momentum. Whereas, in contrast, countries like China and Australia are now pursuing a policy of monetary tightening as their economies have quickly returned to previous growth rates and inflation is now rising."
“The importance of the economies of the Asia Pacific region and Emerging Markets to overall global economic growth continues to grow in importance as the West staggers along, weighed down by growing deficits. Today, the main threats to global markets are the premature removal of stimulus in the West and/or an overly aggressive policy of monetary tightening in the developing economies.”
Husselbee's funds
Source: Financial Express Analytics
Husselbee says investors are closely monitoring events and notes that this year has seen a marked increase in volatility.
“This is what we describe as, a 'risk on, risk off' market. The risk on market is characterised by a weak dollar and rising equity and commodity prices. Conversely, the risk off market is one where the dollar is strong and equity and commodity prices are declining,” he explains.
However, Husselbee says that as recent attention has turned to the Greek fiscal position and fears around potential sovereign default increasing, this relationship has broken down.
“The euro has come under great pressure due to bailout of Greece and the prospect of having to potentially provide assistance to other member states. The dollar has been the main beneficiary of these events. Yet despite everything equity markets have rallied back towards the levels when they started this year.”
Looking forward to the remainder of 2010, Husselbee says investors need to look to a market of stocks rather than a stockmarket in order to make money. “In this environment it is the stock pickers who will succeed as the distance between winners and losers begins to widen,” he says.
“There will also be good opportunity for those investors backing quality, stable companies with a track record of dividend growth. The current environment continues to support equity and commodity prices, however, be wary of becoming complacent. Look for opportunities to take out cheap insurances for portfolios to hedge against risks in the equity market, rising government bond yields, volatility and, of course, currency movements.”
Husselbee has managed a number of funds throughout his career, more recently taking on co-management of a number of funds. His most recent venture is the Invest and Give fund, where he acts as an investment management adviser. This product is designed to funnel gains to charity - currently supporting The Prince's Trust. It is a multi-manager fund following a balanced managed strategy involving a high conviction, multi-asset approach. The objective of the fund is to achieve long term capital growth from investment primarily in a range of collective investment vehicles.
Performance of the Invest and Give fund since launch
Source: Financial Express Analytics