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Julian Gibbs

What is the perfect corporate bond fund investment? I believe it is one that offers a return of between 7 and 8 per cent a year. With a maximum fixed rate of 5.5 per cent available from building societies and Tessa-only Isas, I believe the small extra risks of investing in a bond fund make a 7 per cent return very attractive.

On the other hand, very high-yielding bond funds are much more dangerous and are really more equivalent to an equity investment. Management is all-important and it is vital that there should be an excellent back-up team assessing the risk of each individual corporate bond.

I think Threadneedle has got the answer. Its new strategic bond fund is managed by Ted Bacon, who also manages its AAA-rated UK corporate bond fund. He has never invested in a bond that has defaulted. His fund also has the lowest volatility of any fund in its sector.

He is backed up by 20 full-time professionals managing nearly £16bn in fixed-interest assets. They are recognised experts in both high-yield and investment-grade corporate bonds.

The fund&#39s expected yield is 7.5 per cent and income is paid monthly, with a low initial charge and an annual management fee charged to capital. This fund will invest both in investment-grade bonds and in bonds of below investment grade where the managers believe the bond is likely to be upgraded or offers a very high return in relation to its risk.

The manager has complete discretion to choose the proportion.

Bacon&#39s fund has been one of the most consistent performers and is also a top-quartile performer over two, three, four and five years. I believe this new bond fund is ideal for conservative investors and should show some capital appreciation from current levels and maintain a high income.


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