Baillie Gifford is adding to its range of fixed-interest funds with the introduction of its high yield bond fund.
The objective of this Oeic is to achieve a high level of income and to minimise volatility by investing mainly in non-investment grade bonds. With an income yield of 10.80 per cent a quarter this fund is riskier than the other three bond funds in the Baillie Gifford range, which offer yields of between 2.79 per cent and 6.30 per cent.
The high yield bond fund is likely to have around 35 holdings which cover a range of sectors including industrial, consumer, media and telecommunications. However, Ken Barker, the fund manager, will lead the portfolio towards the industrial and consumer sectors because these companies are likely to have a stronger cash flow over the longer term compared with sectors such as telecommunications.
Telecommunications companies usually need strong growth to generate a steady cash flow and this throws up greater problems for fund managers when picking the winners and avoiding the losers. But on the bright side, this sector is attractively priced and the reward for picking the winners in telecommunications may be great.
This fund is likely to suit income seekers who may be looking at bond funds as an alternative to equities and who are prepared to take a higher degree of risk than investors who go for gilts and investment-grade only bond funds.
According to Standard & Poor's, the Baillie Gifford corporate bond fund is ranked 24 out of 29 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over one year to December 3, 2001.