Invest flexibly in corporate debt with Artemis Strategic Bond

This fund has the advantage of being able to flexibly invest across the credit spectrum, moving between areas such as gilts (UK government bonds), investment-grade and high-yield bonds. It spreads risk by typically holding between 80 and 100 positions and is well diversified by region, sector, credit type and maturity. So alongside some holdings in high-yield bonds, it will hold other types of fixed income, mitigating the risk of that asset class. It can also use derivatives to help manage risk.

Artemis Strategic Bond Fund has been a solid performer, outperforming the Investment Association (IA) Sterling Strategic Bond sector average over one, three and 10 years. It currently offers an attractive yield of 4.65 per cent.

Its managers, James Forster and Alex Ralph, have managed the fund since its inception. Mr Forster has more than 20 years of experience of managing bond funds and was one of the first to establish a retail bond fund in the UK.

The managers aim to achieve a combination of income and capital growth, preserving capital in difficult times and profiting when conditions improve, via owning bonds for each stage of the economic cycle.

In their latest note to investors, the managers said they had been benefiting from the recent distressed selling in credit markets by tapping opportunities in corporate debt. Recent purchases include bonds issued by insurance companies Aviva (AV.) and Swiss Re (SREN:VTX) and hybrid bonds in Dutch telecoms company Koninklijke Ahold (AH:AEX) and German utility RWE (RWE3:GER) has also been bought. The fund has also been actively adding contingent capital securities (CoCos) to its portfolio, notably in Italian bank Intesa Sanpaolo (ISP:MIL). Financials and utilities make up almost half of the fund's holdings.

Adrian Lowcock, head of investing at AXA Wealth, says the fund's consistent performance makes it a good option for income investors.

"Artemis Strategic Bond tends to be a little bit more stable in its dividend yield," he says. "And that's something to consider when you're investing in bonds because it's quite important for a lot of investors to have a good yield."

Investors are also able to choose to receive income payments from the fund on a quarterly or monthly basis.

However, although consistent, the fund has tended to sit within the second quartile of the Sterling Strategic Bond fund sector in terms of performance. But Mr Lowcock still thinks it remains a good option because of its stable performance.

"You want something that will generally grind out a consistent performance," he says. "This fund is about reducing volatility to a certain extent. I'm less concerned about performance over the short term - which is anything less than five years - and more about long-term manager track record, and James Forster has a very good track record.

"He's got a very good macroeconomic understanding, but he then combines that with a good fundamental analysis of the market and I think that's where he really adds a lot of value."

So if you want an attractive income with less volatility than high-yield bonds, the potential for stable long-term returns and capital preservation in difficult times, Artemis Strategic Bond remains a good option. Buy.

Source: Morningstar as at 19/04/16

Top 10 holdings as at 29/02/16

Source: Artemis

Sector allocation (%)

Source: Artemis, as at 29/02/16

Source: Morningstar as at 19/04/16 *Using the oldest share class:GB00B09DML43