The Royal London Corporate Bond Fund offers one of the more attractive yields among corporate bond funds, currently 5.8 per cent. It is among the top 10 performing corporate bond funds over three years and, while it is not so strong in terms of total return over one and five years, it has still managed to deliver positive returns. The fund's objective is to maximise investment return predominantly via income with some capital growth, over the medium to long term.
It invests mainly in sterling credit bonds although the manager can hold other securities including government bonds, index-linked securities, non-sterling credit bonds and floating rate notes. At present the fund is entirely focused on corporate bonds, of which more than 80 per cent are high-quality investment grade bonds rated BBB or higher by rating agencies. These are the bonds considered least likely to default.
The investment team seek to exploit inefficiencies in the fixed-income market and achieve outperformance from a combination of asset allocation, stock selection, duration, yield curve management and off-benchmark investing.
Asset allocation and duration yield curve positions are determined from a quarterly economic review in which key economic factors such as growth, inflation and interest rates are assessed.
The investment team seeks to get sufficient reward for the risk they are taking and hold some credit bonds that are excluded from the benchmarks, such as unrated bonds, smaller issue size bonds, sub-investment grade bonds and non-sterling bonds if they think the valuations are attractive.
ROYAL LONDON CORPORATE BOND FUND A (GB00B3P2K895) | |||
| PRICE: | 85.75p | MEAN RETURN: | 13.32% |
| IMA SECTOR: | Sterling corporate bond | SHARPE RATIO: | 2.06 |
| FUND TYPE: | Open-ended investment company | 1 YEAR PERFORMANCE: | 5.02% |
| FUND SIZE: | £380.92m | 3 YEAR PERFORMANCE: | 43.3% |
| No OF HOLDINGS: | 213 | 5 YEAR PERFORMANCE: | 16.95% |
| SET-UP DATE: | 1 March 1999 | TOTAL EXPENSE RATIO: | 0.95% |
| MANAGER START DATE: | 1 June 2002 | YIELD: | 5.80% |
| TURNOVER: | 77%* | MINIMUM INVESTMENT: | £1,000 |
| STANDARD DEVIATION | 6.16% | MORE DETAILS | rlam.co.uk |
Source: Morningstar & *Royal London Asset Management
Price as at 1 June 2012, performance data as at 31 May 2012
Top 10 holdings as at 30 April 2012
| Great Rolling Stock 6.875% 27/07/2035 | 1 |
| Nationwide Building Society 5.625% 28/01/26 | 1 |
| Electricite De France 5.5% 17/10/2041 | 0.9 |
| Imperial Tobacco 9% 17/02/2022 | 0.9 |
| Abbey National Treasury 5.75% 2/03/2026 | 0.9 |
| Stirling Water 5.822% 26/09/2026 | 0.9 |
| DNB Bank 4.25% 27/01/2020 | 0.9 |
| Juturna Euro Loan Conduit 5.0636% 10/08/2033 | 0.9 |
| Majedie Investments 7.25% 31/03/2025 | 0.8 |
| Arkle Master Issuer 4.681% 17/02/2017 | 0.8 |
Sector Breakdown
| Banks and financial services | 24.3 |
| Structured | 20.6 |
| Utilities | 13.1 |
| Insurance | 6.90 |
| Covered | 6.90 |
| Investment trusts | 5.20 |
| Real estate | 4.80 |
| Consumer goods | 4.30 |
| Consumer services | 3.90 |
| Social housing | 3.90 |
| Telecommunications | 3.30 |
| General industrials | 2.80 |
