View more on these topics

Julian Gibbs

The average UK corporate bond fund now yields 4.1 per cent while the average UK equity income fund yields 4.5 per cent and has much more scope for capital appreciation at current levels.

I believe investment-grade corporate bond funds are much overpriced and are dangerous investments at present because the Government is issuing over £47bn of gilts this fiscal year – 80 per cent up on last year. This oversupply is likely to lead to lower gilt prices.

Investment-grade bonds move in line with gilts and are certain to fall, too. The other major factor is that when bonds are downgraded, as often happens, their prices fall heavily. On the other hand, high-yield bond funds move more in line with equities and, therefore, have much more scope for capital growth as well as having a high income.

The default rate, currently at around 13 per cent, looks as if it has now peaked and looks likely to fall. Well-managed funds usually avoid most of the defaults. Last time the default rate peaked in the early 1990s, high-yielding corporate bonds rose by 40 per cent in that year, with double-digit returns in the following two years.

While it would be foolish to assume that the same returns will be achieved this time, returns of half that amount are certainly on the cards.

The funds I like best are Invesco Perpetual monthly income plus, which also has a small exposure to equities and yields around 9 per cent, Threadneedle high-yield bond (9.1 per cent), Legal & General high income (7.9 per cent), Standard Life higher-income retail (7.6 per cent) and New Star extra high-yield bond (7.8 per cent).

It is wise to invest this year&#39s Isa money in one of these bond funds as delaying could mean that investors miss out on a lot of capital appreciation.


Independent view

I have just returned from some Easter skiing in Canada in something of a state of shock. There are financial advisers in North America who advertise regularly on national TV. Before you say: “So what?”, just think for a moment – Britain doesn&#39t.The fact that Canada has a considerable number of adviser firms advertising speaks […]

The &#39real&#39 thing

The start of the new tax year served as the deadline for product providers to adjust annuity rates within statutory moneypurchase illustrations to reflect new mortality tables, as laid out in CP134.At first sight, the adjustments seem small, with the estimated total cost of implementation amounting to £22m, according to the ABI.But CP134 deserves closer […]

General quotas

Most IFAs are relaxed about the FSA regulation on selling general insurance products but things will not be as simple for general insurance intermediaries, with some facing FSA regulation for the first time.The FSA&#39s CP160, Insurance Selling and Administration: The FSA&#39s HighLevel Approach to Regulation, is due next month.Intermediaries must be registered by January 2005 […]

Network Data opens to smaller packagers

Network Data’s network for mortgage and insurance intermediaries will now be available for smaller mortgage packagers. Packagers will be able to become an appointed representative of Network Data, thus avoiding the costs involved in becoming directly regulated. They will also be able to make use of Network Data’s packaging software. As an appointed representative, the […]

India budget: BJP focuses on growth

By Kunal Desai, Head of Indian Equities

With markets kept open on Saturday, finance minister Arun Jaitley delivered a promising budget focused on growth and decentralisation. While many complained about a six-day working week, there was much to be pleased about and the markets rallied in the afternoon to finish in the green.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm