SWIP scoops up unloved assets

Scottish Widows Investment Partnership (SWIP) is spending to scoop up some of the world's least popular assets.

The company bought up five-year Greek bonds last month after Standard & Poor's, Fitch Ratings and Moody's Investors Service cut the country's credit rating citing its deteriorating government finances, and yields soared.

The yield on the 5.5% Greek government security maturing in August 2014 increased almost 2% to 5.22% between 4 October when Greece held elections, and December 21.

Since then, they have declined 72 basis points to 4.50%.

SWIP also upped its exposure to stocks in the "unloved" Japanese market, according to Ken Adams, head of strategy at the fund manager, Bloomberg reports.

Japanese stocks were the worst performers among the world's biggest markets during the past six months.

Adams says: "You don't wait for things to improve, you buy when the news is hitting the screens and everyone is depressed. You're being paid to take the risk and I think Greece will have no choice but to take action and I think they will."

Fund managers are struggling to find underperforming assets likely to rebound after recent rallies in stock and corporate bond markets.

U.S. stocks posted their biggest annual gain since 2003 last year while yields on U.S. and European government bonds are still at least a percentage point lower than before the financial crisis, according to Bloomberg. 

SWIP has been switching to using money previously held in cash to buy commercial property in the UK over the last 12 months, Adams says.

In November, Standard Life Investments and Aberdeen Asset Management revealed they were upping investments in commercial property to achieve returns harder to come by in other markets.

City of London offices have a rental yield of 6%, according to property adviser CB Richard Ellis Group Inc. while UK 10-year gilts yielded 3.98% as of 4pm in London yesterday.

"Because there's valuation there, we can afford to be quite relaxed about things and take a long-term view and if there is volatility down the road, so be it," Adams told Bloomberg.

"I'm more relaxed than I've been for many years. Things are not as cheap as they were, but they're still cheap. Over time the world will mend itself and the world is cheap. So I'm relaxed because there's long-term value there."