L&G Dynamic Bond Fund

Andy Parsons, Advice team manager at The Share Centre, explains how investors looking to achieve a total return by investing principally in a range of fixed and variable rate income securities, could benefit from the L&G Dynamic Bond fund.

"While the boom in corporate bond buying has expanded the size of established and well managed Bond funds including the likes of M&G and Invesco Perpetual, Richard Hodges, fund manager of the L&G Dynamic Bond fund has managed to outperform these managers by a considerable margin year-to-date.

"Unlike the core mainstream corporate bond funds, which generally focus solely on UK based debt, Hodges has a mandate that allows him to venture into more exciting asset classes. The fund's overriding objective is to achieve a total return in terms of both income and capital growth.

"The flexibility of European legislation, known as UCITS III, means Hodges does not only consider run-of-the-mill debt offerings, but he also has the ability to use techniques - namely via derivatives - to minimise any potential downside. This allows returns to be achieved in both a rising and falling market.

"The fund only launched in April 2007 however, its performance on a cumulative basis for the past year to 18 September 2009, shows it returning 39.22 per cent and it was ranked 1st in its sector. Plus, year-to-date the fund has returned 34.96 per cent compared to a sector average of 15.87 per cent. Hodges success is largely down to the flexibility of the fund and his knowledge and experience of the sector.

"Given the fund's unconstrained nature, it can invest in investment grade debt, high yield debt and securities that are listed in overseas companies. The freedom of the fund allows Hodges to arrange and re-arrange his portfolio to generate returns based on his ideas regarding the economic outlook.

"While the title of the fund implies ‘bond', investors should not confuse this with a standard corporate bond fund, given its ability to use derivatives. We feel this fund would make an exciting addition to any standard corporate bond portfolio."