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Fidelity offers bond fund for all weather

Fidelity Investments has established the sterling bond fund, an Oeic which invests mainly in UK investment grade bonds.

The fund complements Fidelitys existing range as it is more aggressive than Fidelity moneybuilder income but more cautious than Fidelity extra income.

Although the new fund has a bias towards UK investment-grade bonds, it can invest in international fixed interest securities, and up to 20 per cent in high yield bonds. The exact split will depend on market conditions. Allowing for an aggressive or defensive strategy to be used when appropriate. 5.16 per cent running yield.

The fund is managed by Ian Spreadbury who runs Fidelitys moneybuilder income and extra income funds. He has 20 years experience in managing fixed income products and joined Fidelity in 1995.
When running the new fund, Spreadbury will build the portfolio from the bottom up and has the skills of the 113 members of Fidelitys global fixed interest team at his disposal.

Although the fund is managed relative to a benchmark index, there are no limits placed on deviation from the benchmark weightings. The only restriction is that no more than 20 per cent will go into high-yield bonds. This flexibility allows Spreadbury to match his view of the best asset class with his best ideas.

He can adopt a defensive strategy in falling bond markets by aggressively overweight government bonds if corporate bond valuations are high and high yield bonds are not providing a high enough return to compensate for the higher risks.

In a flat market he may take advantage of foreign exchange rates by buying bonds issued in other currencies then hedging back into sterling. In a rising market he may overweight corporate bonds and high yield bonds up to the 20 per cent maximum.

This fund may be useful for investors who want asset allocation to be controlled by a fund manager. However, some IFAs may find there is little appetite for bond funds in the current economic environment.

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Type: SicavAim: Growth and income by investing globally fixed-interest securitiesMinimum investment: Lump sum $2,500, euros 2,500, monthly $100, euros 100Investment split: 100% in fixed-interest securitiesPlace of registration: LuxemburgCharges: Initial 3%, annual 1%Commission: Subject to negotiationTel: 0800 212433

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