Vanguard Asset Management UK is launching two tracker funds that will invest in UK index-linked gilts.
Vanguard UK Inflation-Linked Gilt Index Fund tracks the performance of the Barclays Capital UK Government Inflation-Linked Float Adjusted Bond Index, and Vanguard UK Long Duration Gilt Index Fund tracks the performance of the Barclays Capital UK Government 15+ Years Float Adjusted Bond Index.
The tracker funds have an annual management charge of 0.15 per cent, and Vanguard UK Inflation-Linked Gilt Index has a 0.4 per cent preset dilution levy, while Vanguard UK Long Duration Gilt Index levies 0.15 per cent. The pre-set levy aims to allocate the costs equitably so new investors bear the cost of their own transactions, and to protect existing investors from the impact of new cash coming into the fund. If investing direct, the minimum increment is £100,000, but the funds should be also available through the main distribution platforms in smaller multiples.
Bond funds fail to deliver consistent returns
Only 18 funds out of the 1,117 funds in the 12 main Investment Management Association sectors achieved consistent top quartile performance during the three 12-month periods to the end of 2010, reports fund of funds provider Thames River.
In five sectors, no funds were top quartile in any of the three years. These were Sterling Corporate bonds, Sterling Strategic bonds, global fixed income, Asia ex Japan and UK Smaller Companies. Sterling corporate bond and Sterling strategic bond funds were also the two least consistent sectors in terms of delivering above median returns during those three periods.
Rob Burdett and Gary Potter, multi-manager co-heads at Thames River, believe that this data shows how hard the job of selecting reliable funds has been in recent years. They expect this situation to gradually improve as markets and economies normalise, at least relative to recent experience.
Schroder investment trust targets mid-caps
Schroder UK Mid Cap Fund has changed its investment mandate to largely focus on FTSE 250 stocks.
The investment trust, which recently changed its name from Schroder UK Mid & Small Cap Fund, previously achieved strong positive net asset value returns over one, three and five years by investing in small and medium-sized companies. However, it can invest up to 20 per cent of its assets outside the FTSE 250.
Schroders said that there has been a lot of acquisition activity among mid-caps, these companies are more liquid than small-caps, the FTSE Mid 250 has outperformed the All-Share over one and three years, and there are few funds focused on mid-caps in contrast to a number focused on small-caps.