Equity momentum has led Citywire AA-rated Marc Basselier to undertake several positional changes since the start of the year.
Basselier trimmed several holdings in his AXA WF Framlington Global Convertibles fund to ensure the delta remained manageable.
Speaking to Citywire Global, Basselier said: ‘The fund is benefiting from the equity momentum. This has driven the delta very high, and that’s why I have taken some profits and lowered the delta of the portfolio.’
Basselier’s main investment idea is to retain a delta of around 40-50, limiting the equity sensitivity of the overall portfolio. This has involved selling positions at set target prices.
‘We sell convertible bonds when the delta is high, hopefully around 100. By doing that, we always try to secure the capital we put at work. Clients who come for convertibles are a little bit afraid of risk, so we need to be risk averse,’ he said.
Switches and additions
Looking at short-term momentum, Basselier believes equities have the potential for further gains. This led him to sell positions in electronics giant Sony and payment terminals Ingenico, while reinvesting in US names such as travel services group Priceline and software firm Citrix.
‘These are good names with a positive performance. We’d like to add more in Europe but the primary market is still poor there,’ he said.
Given quantitative easing and low interest rates, Basselier said European companies are reluctant to issue convertibles. This, he said, is what has driven him to look at opportunities in broader global market.
Discussing Japan, Basselier said the equity market has rallied strongly and, while he has reduced exposure recently, there is a case to reinvest here.
‘We are neutral Europe and Japan, where we have recently taken some profits although we want to start to re-build our exposure,’ he said.
Going for growth
On a sector basis, Basselier doesn’t own many financials as he said banks tend to issue more Tier 1 debt than convertible bonds at present. Instead, he has a bias for growth and prefers sectors such as information technology and healthcare.
Also, he favours the European real estate sector as he said it provides a 4% yield without a lot of risk. ‘There’s a strong appetite for real estate and valuations are not completely full,’ he said.
Over the past three years to February 2015, the AXA WF Framlington Global Convertibles fund returned 35.31%. This is while its Citywire benchmark, the Thomson Reuters Global focus Convertible index, rose 28.11%.