According to Morningstar data, the M&G corporate bond fund has grown by 224 per cent between December 15, 2008 and October 5, 2009 from £1.29bn to £4.2bn. Meanwhile, the Invesco Perpetual corporate bond fund has grown by 106 per cent from £2.5bn to £5.2bn.
Other bond fund managers, such as Jupiter and Aviva, have also seen their bond funds swell in terms of assets. The top-performing fund in the past three years, the M&G strategic corporate bond, has grown by 555 per cent from £254m to £1.66bn.
Early 2009 was heralded by a number of fund managers as a “once in a lifetime opportunity” for bond funds and that has been reflected in performance in the last six months, with some offering 50 per cent returns.
Hargreaves Lansdown investment manager Ben Yearsley says: “It is obviously something you cannot ignore and it has to be monitored. The same liquidity problems apply to these funds as they do to Neil Woodford. It is a case of trusting the merits of each individual manager. There is bound to be profit-taking at some stage.”
Whitechurch Securities managing director Gavin Haynes says: “Liquidity has to come into it at some stage. I guess it depends on how each fund is managed and keeping a very close eye on performance.”
A spokeswoman for M&G says: “2009 has been a record year for new issuance in the corporate bond market. Although issuance was down slightly in August (a seasonal trend), we expect levels of issuance to remain solid into 2010. Strong inflows into the M&G corporate bond funds have been used to finance purchases of these issues. Recently, the funds have invested primarily in new issuance as this area has offered particular value.”