Fund Objective

The Fund aims to achieve an above average level of income through investing mainly in a high quality portfolio of sterling denominated fixed interest securities.

View on Past Performance

Until early June, corporate bonds outperformed gilts because of the significant tightening of BBB issue spreads. Among the corporate universe, industrials were the best performers. The negative news flow on sub-primes along with the well-documented collapse of two hedge funds inverted the trend in June, offsetting most of the excess return for the period.During the quarter, we reduced the beta of our portfolio by selling high beta names (Siemens Hybrid, CIiT) and favouring more conservative issuers (BMW, DCXx, Enel). At the end of June, we increased our convertible bond exposure and maintained a slightly underweight position in terms of duration.

Future Expectations

Fundamentals (global growth and corporate results) remain very supportive for the moment. However, continued negative news flow on sub-primes could put pressure on credit markets this summer. On the positive side the additional market volatility could offer some good levels of entry. We still prefer the Financial sector which lagged recently and is impacted less by re-leveraging stories.

Fund Details