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Bond is back

With the markets now positively shaken – not just stirred – the new name on the street is bonds, corporate bonds.

Data from Old Broad Street Research’s fund ratings website is showing a clear increase in the popularity of the UK corporate bond fund factsheets downloaded by IFAs during June, July and August.

The table (top right) shows the most popular downloaded factsheets.

If we compare this table with the previous table of most popular fund downloads we studied for Money Marketing, we can see that Invesco Perpetual corporate bond fund has moved up from number seven to number two and there is a new entry at number eight, Old Mutual corporate bond fund.

This prompted us to look at our sector breakdown also, where we found the trend is replicated, with the UK corporate bond sector moving up to number four.

With equity markets faltering and showing great volatility, advisers appear to be looking towards bonds as a way to generate returns with less volatility and lower risk than equities. Corporate bond spreads have widened substantially over the last year or so and advisers are showing signs that they believe investors will now be paid for the risk they are taking. With spreads over Government bonds at close to unprecedented highs in corporate bonds, this may well be the case.

The next question is whether the interest in corporate bonds will continue and, if so, where will it be directed? With the Investment Management Association splitting the UK corporate bond and UK other bond into three new bond sectors – sterling corporate bond, sterling strategic bond and sterling high yield – it will be interesting to note where advisers focus in the future.

The choice is essentially investment grade, high yield or let the fund managers do it on your behalf in the sterling strategic bond sector. These managers are able to allocate between investment grade and high yield on behalf of clients, therefore taking the decision for them.

We believe this development should assist advisers in understanding the different types of bond fund available to investors. Further differentiation can be found on our website at www.obsrfundratings.co.uk.

Position

June-August March-May

1 Invesco Perpetual high income (1)2 Invesco Perpetual corporate bond (7)3 First State Asia Pacific leaders (4)4 Invesco Perpetual monthly income plus (2)5 Neptune global equity (6)6 Invesco Perpetual income (3)7 M&G global basics (-)8 Old Mutual corporate bond (22)9 M&G recovery (9)10 Artemis income (11)

Source: www.obsrfundratings.co.ukPosition

June-August March-May

1 UK all companies (1)2 UK equity income (2)3 Global growth (3)4 UK corporate bond (6)5 Cautious managed (3)

Source: www.obsrfundratings.co.uk

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