Royal London Sterling Extra Yield Bond fund has been managed since its 2003 launch by Eric Holt, who has three decades of bond market experience behind him. In 2019, he teamed up with co-manager Rachid Semaoune.

The managers aim to provide investors with a high yield (5.5% at present, paid quarterly) without taking the degree of risk normally associated with high-yield funds. For this reason, they favour bonds secured against specific assets, such as property or cashflow.

They look to exploit bond market inefficiencies and believe that by considering a wider investment universe than many of their peers, they can uncover value in many areas that are often overlooked and undervalued. They do not rely on bonds’ credit ratings. The main question for them is whether there is enough reward for the risk being taken. In practice, this means that the portfolio will hold untypical bonds, such as unrated bonds, sub-investment-grade bonds, smaller issue-size bonds and non-sterling bonds.

The fund is highly diverse, with almost 240 holdings. It typically has around 30% of the portfolio in unrated bonds.

September 2020