Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a740373

Should strategic bond funds resist the lure of high yield?

by Robert St George on Mar 18, 2014 at 15:00

The top two funds in Citywire’s Sterling Strategic Bond sector over the past three years – each having returned more than 40% through the period; their nearest competitor has delivered 35% – both run high allocations to non-investment grade bonds, but in markedly different ways.

The £883 million Royal London Sterling Extra Yield Bond fund, managed by A-rated Eric Holt (pictured), has produced 43.4% over the past three years and boasts a gross income yield 7.08% on its Z shares.

The bulk of its portfolio, 77.4%, is in high-yield debt and its largest holding is in B-rated 2031-dated Enterprise Inns paper carrying a 6.375% coupon.

Second place goes to the £851 million Artemis High Income fund, headed by the AA-rated duo of Adrian Frost and Adrian Gosden. They have returned 41.3% on a three-year view, with a present distribution yield of 5.2%.

Driving that performance has been their use of their equity allowance: 17.1% of the portfolio is in equities, with positions in the likes of HSBC. As Wealth Manager revealed last month, Artemis recently rejected switching the fund out of the IMA’s Sterling Strategic Bond sector.

The biggest

The sector’s two largest funds are less gung-ho on the high-yield front. M&G Optimal Income , the £18 billion juggernaut steered by + rated Richard Woolnough, has just a 29.9% net weighting to high yield with a further 10.3% in equities. Half the fund is in investment-grade bonds and a quarter is in sovereign debt. It has returned 30.7% over the past three years.

The £3.9 billion Invesco Perpetual Monthly Income Plus fund has 17.1% in equities and 50.8% in high-yield bonds. Under AAA-rated Ciaran Mallon and the + rated pair of Paul Causer and Paul Read, it has returned 30.9% and has a distribution yield of 5.28%.

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Investing for income in a changing environment


With talk on interest rates on the horizon, our latest roundtable debate covers income investing against a changing backdrop

More about this:

Look up the funds

  • M&G Optimal Income A Acc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Royal London Sterling Extra Yield Bond A
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Artemis High Income R Inc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Invesco Perpetual Monthly Income Plus Inc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Stefan Isaacs
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Eric Holt
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Adrian Frost
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Adrian Gosden
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Richard Woolnough
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Ciaran Mallon
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Paul Read
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Paul Causer
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet