London-based City Financial has relaunched its Strategic Global Bond Fund - with a new lead manager - to benefit from global credit investment opportunities.

The fund, which was formerly managed by Mark Astley of Millennium Global Investments, previously advocated a “purely strategic allocation of assets”. However, under the new management of Graham Glass, who acquired management responsibility on 1 January, a more “blended approach” will be deployed, using the Barclays Capital Global Aggregate Total Return Index as an oversight, the firm said in a statement.

Glass currently works at Argyll Investment Services, and has a 15-year background in managing fixed income assets, with a focus on credit markets. He also managed €30 billion ($38.4 billion) of fixed income assets in the Paris office of Assicurazioni Generali, the Italian investment bank.

“The fund is well-positioned to capitalise on the last three years’ extraordinary volatility in credit markets, which has left many bonds pricing in default rates that are quite simply irrational,” said Glass.

As part of the changes to the fund, a tactical allocation based on macro forecasts and outright market levels will also be integrated, City said.

The Barclays index currently adopts a weighting of over 50 per cent to government debt, but Glass’ new positioning will set the fund’s exposure to 20 per cent.

“When one considers that investment grade corporate debt is pricing in one in every seven companies to go bankrupt in the next five years, one can see the potential value in today's corporate bond market,” said Glass.

“Even in the depths of a prolonged recession, the average five-year default rate only ever climbed to 1.55 per cent in 1938, as measured by Moody's. This is one of the reasons for the switch from a plain vanilla government bond fund into one where credit features strongly,” he added. For more on his outlook for bonds, see the interview elsewhere in this publication today.