Our Tenax activity piece took an August break so this note covers the past two months, almost taking us to the end of Q3.

This has been a period that saw US stocks climb to new all-time highs and then retrace it all to finish unchanged over the period. Concerns have been mounting over the persistence of the COVID-19 delta variant, ‘transient’ inflation and, most recently, the travails of China’s massively indebted Evergrande, who’s financing looks more and more like something that Bernie Madoff might have put together.

Despite further uncomfortable inflation figures, US CPI still running over 5% and UK RPI not much lower, US bond yields have not moved significantly, 10-year yields are up 4bp while the long bond yield has fallen 6bp, flattening the US yield curve. On this side of the Atlantic, yields have risen across maturities, the UK, French and German 10-year all moving up by around 10bp.

Overall the asset mix of the Fund has not moved significantly since the summer, though there have been a number of transactions within the portfolio – see table, right.

We have continued to build our book of holdings in AAA-rated floating rate notes, still considering this to be the most attractive area in credit at present (the weighting, right, was struck just after the maturity of some short-dated notes, we would expect the weight to be back over 37% shortly). New to this area is a note from United Overseas Bank due in September 2026 and one from the Bank of Nova Scotia due in March 2025, while we have sold the Australia & New Zealand Banking FRN that was due in January next year.

Elsewhere in credit sectors a ‘cap and collar’ note that we took from Goldman Sachs in 2014 matured, and one of our ‘perpetual’ USD bonds from RBS, which we had acquired at 80c on the dollar in 2019, was repaid at par. New to the portfolio are a small holding in Berkeley Group 2.5% 2031 stock (a ‘green’ issue) and Nordea Bank 1.625% 2032 stock, both of which were new issues, while gone is the longest-dated conventional holding, Diageo 1.25% 2033. In the convertibles area we added further to the holding in Capital & Counties 2% CNV (the issue that converts into part of their stake in Shaftesbury) and have just added an initial holding in a recent new issue from Delivery Hero of 2.125% stock convertible until 2029.

Infrastructure has seen quite a lot of activity. Early August saw an opportunity to switch part of our HICL Infrastructure holding into a larger position in BBGI International, our preferred company in the space. We have reduced our exposure to Gresham House Energy Storage after a strong run, but have taken-up rights and increased our weighting to SDCL Energy Efficiency after meeting their management again (in person! quite a relief...). Property has also seen activity, we sold our holding in Target Healthcare over the last few days of July after a strong period for their shares, they subsequently conducted a fund raising (at lower levels) and we have partially re-instated our holding. Grainger conducted a placing of new shares at the beginning of this month, which we used to establish a new position in this company, and have subsequently added to the holding. We have also added further to Capital & Counties. Equity has seen the least activity, we have further reduced international while adding modestly to UK exposure, Berkeley Group is a new holding in this area established when their equity fell back in early September (along with equity markets generally).

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