Fidelity bond veteran Ian Spreadbury steps down

Mr Spreadbury manages a number of popular bond funds, including the IC Top 100 Fund, Fidelity Strategic Bond (GB00B469J896). He is also lead manager of corporate bond fund Fidelity MoneyBuilder Income (GB00B3Z9PT62), and Fidelity Extra Income (GB00B469P257).

The changing of the guard at Fidelity will see Sajiv Vaid – deputy manager and with 25 years’ experience – become lead manager on Fidelity MoneyBuilder Income and Fidelity Extra Income. He will be supported on Fidelity MoneyBuilder Income by co-manager Kristian Atkinson, and on Fidelity Extra Income by co-manager Peter Khan.

Fidelity Strategic Bond will be run by the fund’s current co-managers Tim Foster and Claudio Ferrarese, who joined the team in April 2017. Mr Foster has 14 years’ investment experience, while Mr Ferrarese has 13 years.

Mr Spreadbury's departure may cause angst among investors. He oversees over £5bn of assets in the MoneyBuilder Income and Strategic Bond funds and built up a reputation as a reliable and defensive bond manager. However, change may be welcomed by others who have witnessed more recent performance fall below expectations.

While the manager tends to be defensive, performance towards to the end of his career has slipped. The Strategic Bond Fund has not beaten the Investment Association (IA) Strategic Bond sector average in any cumulative period dating back to 2011. Breaking down performance into calendar years since 2010, it only beat the sector average in 2010, 2011 and 2014. In eight of the past nine calendar years, the fund has also been more volatile than the sector average and ergo less defensive.

The MoneyBuilder Income fund has also recently suffered poor relative performance versus the IA Sterling Corporate Bond sector average, but not to the same extent.

Mark Dampier, head of investment research at Hargreaves Lansdown, said he would adopt a wait-and-see approach to the changes and suggested investors do not rush to sell out of Mr Spreadbury’s funds.

“Bond managers tend to need more of a macro [perspective], which is quite a hard thing to grasp, and experience is very helpful in that,” he said. “Ian has had a fantastically long track record and you can’t make up 40 years’ experience easily. But he’s still got to the end of the year and he's got a pretty experienced team in place.”

Ryan Hughes, head of active portfolios at AJ Bell, attributed the funds' underperformance to the defensive positioning given the team has been more cautious about the world in the current late-cycle credit market.

He added: We don’t expect this to change much with the departure of Ian Spreadbury. The new managers are likely to follow the same approach and we are comfortable with this and use the funds for these defensive characteristics. They historically have come into their own during times of crisis in the bond market.”

He also said the transition should be managed well and not concern investors. “[This retirement] should come as no surprise given it has been well flagged by Fidelity for a number of years,” he said. “Succession planning clearly started three years ago with the recruitment of Sajiv Vaid from Royal London to co-manage the MoneyBuilder Income fund.”

AJ Bell includes Fidelity MoneyBuilder Income within its managed portfolio service and Fidelity Strategic Bond on its favourite fund list. “With such strength and depth on the fixed interest team, we see little reason to change our view on both of these high-quality fixed interest funds,” Mr Hughes added. 

Investors who do want a higher risk, potentially higher returning, strategic bond fund could consider Artemis Strategic Bond Fund (GB00BJT0KT28), he suggested. It typically holds 100 to 130 positions across different sectors, credit ratings and maturity. It has a yield of 3.98 per cent and ongoing charge of 0.57 per cent.

Invesco Tactical Bond Fund (GB00BJ04K828), is another alternative, Mr Dampier added. The fund does aims to achieve growth but adopts a defensive position, with low level of interest rate sensitivity and a high allocation to liquidity via government bonds, short-term corporate bonds and cash. It has a yield of 2.67 per cent an ongoing charge of 0.63 per cent.

Fund performance

Source: FE Analytics as at 02/10/18