Fund Objective

The main objective is to provide a secure income from investment in Corporate Bonds, Eurobonds, Gilts and other Fixed Interest or Preference Securities.

View on Past Performance

Fixed interest markets performed poorly throughout October, in spite of the coordinated interest rates cut by several leading central banks. Those investors who were hoping that September's poor performance by corporate issues could be put behind them were to be disappointed as the collapse in equity markets and its accompanying blow to sentiment saw yield spreads rise to historically high levels.The only sterling bond investors to benefit from the carnage in equity markets in October were those holding short-dated government issues as the market regarded even medium and long dated gilts as too risky. Indeed, such was the extent of risk aversion during the month that the biggest beneficiary appeared to be the market in short-dated Treasury Bills as even cash in the bank was no longer viewed as safe.Short dated issues were also given a boost by the announcement by the Bank of England's Monetary Policy Committee (MPC) that is was cutting rates by ½% in order to calm the markets and ease fears of recession. Corporate bond yield spreads continued to widen throughout October, with those from financial issuers showing further weakness. The announcement by the government that it would buy stakes in various UK banks provided some respite, but the market remained weak.By early November, the average spread for a sterling "BBB" rated corporate bond was in excess of 6%, its widest ever level. The bank rescue plan initially saw medium and long-dated gilt prices fall sharply, as investors feared large scale issuance to pay for the scheme, although prices soon recovered as the market began to detect that further interest rate cuts here may be imminent.Such expectations were proved accurate as the MPC announced a surprising reduction of 1.5% in UK interest rates to 3% (their lowest level in over half a century) at its November meeting. This dramatic move reflected the severe deterioration in the economic climate throughout October, with the most significant release showing that growth had turned negative in the third quarter - the first time since 1992.

Future Expectations

For the Rensburg Corporate Bond Trust we view the historically wide level of yield spreads on sterling corporate bonds that are now on offer as highly attractive in - crucially - the medium to long term. We are currently making selective purchases of high quality issues, but remain wary that the level of defaults in this market will rise sharply in the months ahead, making sector and stock selection crucial.

Fund Details