Accounting scandals and revelations that highly paid analysts had inflated recommendations on companies that their banks were advising have caused obvious damage to the equities markets.

They may also have affected the corporate debt market, a traditional safe haven during difficult equity markets.

Several blue chip issuers such as pharmaceutical giants, Unilever, experienced ratings down grades in 2002. Unilever debt used to be AAA rated and is now single A rated.

According to investment managers at Butterfield Asset Management (BAM), these developments are further proof that it pays to maintain to diversity in investment funds.

BAM have just been recognised for the sixth year in a row by the annual Standard & Poors awards.

Two of their offshore funds, the Overall Group of Butterfield Funds and the Butterfield Capital Appreciation Bond Fund won first prizes for five year perfromance.

BAM managing director, Ian Coulman, said the S&P awards are a “tribute to the effort of our strong investment management team, with representations in Bermuda, the Cayman Islands and Guernsey.”

He said that a key element of BAM's successful fixed income strategy had been their insistence on diversity and quality for the portfolio, adding that the award-winning funds were not judged simply on performance, but also for avoiding volatility.

Mr. Coulman said BAM has found one particular sector of the fixed income market less volatile than the corporate debt market: asset-backed and mortgage-backed securities have not suffered credit downgrades to the same degree as the corporate debt market.

Asked to explain the terms asset-backed and mortgaged-baked securities, Mr. Coulman said that in basic terms, asset backed securities are bonds which are secured against a pool of assets such as credit card receivables or auto loan receivables.

He explained that Ford and GM do a lot of consumer financing and the monthly payments expected from those loans can be sold into a trust which in turn issues securities. The likes of Butterfield Asset Management are then able to invest in those bonds and get high quality debt instruments.