Cazenove Investment Fund Management has made its UK corporate bond fund available to the IFA market for the first time through an Isa.
The UK corporate bond Isa aims for a high level of income and capital growth by investing mainly in investment-grade corporate bonds within the UK, although it has the discretion to invest elsewhere. The fund also has the ability to invest up to 30 per cent in gilts, but it is currently not invested in them.
Michel Gonnard, who heads up Cazenove's fixed-interest team, runs the fund. He joined the company in 1997 from Barclays Global Investors and also manages the Cazenove international bond fund.
With the UK corporate bond fund, Gonnard chooses bonds in a rage of sectors, with ratings of BBB upwards. The portfolio is currently overweight in the auto and telecommunications sectors relative to its benchmark index, the Merrill Lynch Sterling Non-Gilt Index, which has had a negative impact. However, it has also reaped the rewards of being overweight in financials and consumer products.
The fund has no target yield because this is felt to constrain fund managers, who may feel obliged to invest in certain sectors and holdings to maintain the target yield. Instead, it aims to outperform its benchmark index by 0.75 per cent. However, it does have a current yield of around 5.9 per cent, which puts it at the lower return and lower risk end of the spectrum.
Income products are in demand from investors as the race to use up their Isa allowance before the end of the tax year accelerates. However, some investors may be put off by this funds ability to stray into other regions, despite its name.
According to Standard & Poor's. the Cazenove corporate bond fund is ranked 12 out of 57 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to February 22, 2002.