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With a portfolio overweight financials during one of the biggest banking crises in decades, it could be argued an overweight exposure to securitised debt in a falling property market isn't the shrewdest move to make.

Yet that is exactly what the managers of Aegon's £355.3m Sterling Corporate Bond fund have done. Iain Buckle, support manager to David Roberts since January 2007, says the team has great conviction about its large stake in securitised debt, despite the market taking a dim view of such small and illiquid bonds in struggling sectors such as publicans.

Punch Taverns is in the portfolio's top 10, while another holding is Mitchells & Butlers, which owns and manages the Toby Carvery and All Bar One chains. Mr Buckle says these stocks are more defensive because of their reputation for value food offerings. When it comes to securitised debt, he adds, "it's not like a 100 per cent mortgage - the LTV on these things are quite conservative".

This weighting encompasses whole business securitisations, he says, whereby brands and other intellectual and operational rights are secured against the bond, in addition to the typical property as security. One such case in this fund is Dignity Memorial, the UK's largest provider of funeral services - "perhaps the most recession proof industry you can think of", Mr Buckle says.

Other defensive positions include those in British American Tobacco and Japan Tobacco, and an underweight in non-financial industrial names in the TMT and utilities sectors, which is largely shaped by the team's expectation of further slashes to the UK base rate amid deflationary forecasts and a weakening economy.

That the fund is to hold firm on its big investments into financial bonds could be construed as missing the exit turn earlier in the year and now committing to the road ahead, under the guise of a long-term investment philosophy. The commitment to financials has "been to the detriment of the fund over the past 12-18 months", Mr Buckle confirms - a result borne out by figures from Morningstar.

The fund underperformed the IMA sector peer group over three years to date, returning a loss of 18.15 per cent compared with an average loss of 11.8 per cent. Over three months, it underperformed the peer group by 4.62 percentage points to return a loss of 13.55 per cent.

That said, 95 per cent of the fund is invested in investment-grade bonds, according to Mr Buckle, and in response to the toxic bond trading environment, the team has started improving the quality of its financial bonds rather than relinquishing them.

"For the past six months we have been moving up banks' capital structures from subordinate debt to more senior, high-ranking parts," he says, stating that government intervention in banks is likely to have a broadly more favourable affect on the higher-tier debt.

"Although it is hard to see a catalyst for those bonds to move massively higher, we think they pick up a decent yield and we have no fundamental concerns about them. We feel over the longer term they offer significant upside," he says, adding that through bank intervention, some bank bonds were attractively priced for essentially the same risk as short-dated government bonds.

For example, Citigroup Capital, which has a 2 per cent allocation in the portfolio, offers a yield of 16 per cent, while Abbey National, 2.2 per cent of the fund allocation, offers 11 per cent yield. Mr Buckle says: "If spreads were to stabilise, then the total return of the fund would be pretty decent because the yield is already in there. We are not looking for significantly tightened spreads to generate decent returns, although over the long term we are positioned for that."

He is sceptical about the current value levels of government bond yields (at roughly 4 per cent) and the investment team has opted for investment-grade exposure rather than high-yield bonds, which reached a historic monthly low in October. The fund is overweight bonds of 5 to 10-year durations, which the team anticipates will offer strong performance following a severe rate-cutting environment. That said, he expects best performance to derive from 20-year maturity bonds, historically the cheapest part of the curve, so a small amount of that exposure has been added to the portfolio.

The fund factsheet lists cash as 11.3 per cent of the fund but this is misleading, says Mr Buckle. "It's probably skewed because the fund has a position in gilt futures, which accounts for approximately 10 per cent, and the remaining 1 per cent is cash," he says.

While it may be tempting to keep a greater cash reserve available to take advantage of the cheap bond valuations being presented in the market, this fund is as fully invested as possible, says Mr Buckle. "Our investors expect us to be fully invested in the market when they buy our fund. They’re not buying a quasi-cash or money market fund," he says.

"You are getting very well rewarded for the risk you are taking at the moment. The amount of compensation for the risk of default is extraordinarily high and we don’t think bond defaults will increase anything near the levels suggested by this pricing," he concludes. "Corporate credit is a very good asset class for the longer term. Some of the yields we have discussed offer excellent long-term returns."