| Asset Group | Asset Sub-Group | Investment Category |
| Fixed Income | Sterling bonds | Adventurous |
The fund has been managed by Eric Holt since its inception in April 2003 and he has had support from co-manager Rachid Semaoune since January 2019. Eric Holt has extensive knowledge of investment grade and high yield corporate bonds, gained over a career spanning more than 40 years. Holt also manages the Royal London Ethical Bond fund. The co-managers are supported by an investment grade credit team of 12 people, comprising both fund managers and credit analysts. Analysts provide fundamental credit evaluation and idea generation, whilst the managers do more work on relative value analysis and position sizing. The fund seeks to achieve a gross redemption yield of 1.25 times the gross redemption yield of the FTSE Actuaries British Government 15 Year Index, although the fund itself is not benchmark constrained. To achieve this, the strategy will invest across the diversified spectrum of sterling credit opportunities. The fund’s combined exposure to high yield and unrated bonds is expected to be around 80% with the remaining investment grade exposure towards subordinated financials and corporate hybrids. The fund is diversified with around 200 holdings to minimize idiosyncratic risk. At least 75% of the portfolio will be in sterling assets with non-sterling exposure hedged. As can be expected from Royal London fixed income strategies, the team focus on under-researched parts of the market, including unrated bonds. Analysts focus on credit enhancements which the team believe are undervalued by the market and includes security, structure, covenants. Since inception the fund has outperformed the Morningstar GBP Flexible Bond and IA High Yield Bond sectors. 2022 was the fund’s first negative calendar year since 2008, having managed to deliver a positive return in the GBP High Yield’s weaker years of 2011 and 2018. Volatility has tended to be in-line with the GBP High Yield peer group. Opinion The fund has a solid track record since inception and boasts a high level of current yield versus the Sterling Fixed Income sector. That said, potential for significant drawdown is high considering the high level of exposure to non-investment grade bonds. January 2023 | ||
Risk warnings
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