FE highlights bond funds to interest savvy ISA investors
For ISA investors seeking exposure to bond funds, FE picks four-well managed strategies stewarded by experienced managers:
M&G Strategic Corporate Bond, Jupiter Strategic Bond, Fidelity Moneybuilder Income and Investec Emerging Markets Local Currency Debt.
M&G Strategic Corporate Bond
Managed by FE Alpha Manager Richard Woolnough, the M&G Strategic Corporate Bond Fund has impressive long-term performance, returning 56% over five years to end February 2012. At least 80% of the fund is held in investment grade corporate bonds, with the remainder split across a variety of assets including gilts, overseas bonds and equities.
Oliver Clarke-Williams, Investment Product Consultant at FE, said: "The fund employs a risk-rated return strategy, meaning that it concentrates on avoiding the losers. M&G's fixed interest team, which is well known for its research capabilities, carries out in-depth analysis of each issuer, including meeting the management team. With all the resources this fund has at its disposal, it should continue to perform well."
Jupiter Strategic Bond
The Jupiter Strategic Bond fund, which was launched in June 2008, has doubled in size in the past year to over £800 million. The fund invests in high yielding assets, which include high yield bonds, investment grade bonds, government bonds, preference shares and convertible bonds. It has a combined objective of generating high income and capital growth.
Oliver Clarke-Williams commented: "This fund's current yield in excess of 4% deems it a useful investment for those seeking income. Over the last three years the fund has returned 70%, compared to 45% for the IMA Sterling Strategic Bond sector. It is managed by Ariel Bezalel who has an FE Alpha Manager rating, marking him out as in the top 10% of fund managers."
Fidelity Moneybuilder Income
FE Alpha Manager Ian Spreadbury has been managing Fidelity Moneybuilder Income since its launch in 1995. Performance has been either first or second quartile in every year. It is predominantly invested in sterling investment grade corporate bonds.
Oliver Clarke-Williams explained: "The fund is extraordinarily diversified currently containing over 300 holdings ensuring a very cautious approach to investing. The fund has proved popular, with assets under management more than trebling in the previous three years to reach £2.8 billion as of February 2012."
Investec Emerging Markets Local Currency Debt
Launched by FE Alpha Manager Peter Eerdmans and his team June 2006, the Investec Emerging Markets Local Currency Debt fund has returned in excess of 110% in the last five years. It invests in public sector, sovereign and corporate bonds.
Oliver Clarke-Williams noted: "The fund's premise is that the potential of the world's less developed economies far exceeds that of the developed world. It is a riskier proposition than the average fixed income fund, with a significant amount of currency risk. Investec has put a variety of restrictions in place relating to credit rating and portfolio duration, but despite these cautionary measures the fund remains an adventurous choice."