The fund is aimed at investors who need a high level of income and want to invest in Europe. It will invest in a portfolio of corporate bonds placed on the market by companies all over Europe, as well as a small number of UK companies.
Although this fund promises a high yield of 9.46 per cent, it comes at the expense of having a higher level of risk. Looking at the gradings of the bonds that the fund will invest in, a total of 67 per cent will be high-yield junk bonds, with a rating of B. Junk bonds are issued by companies that have a potentially greater chance of going under, whilst investment grade bonds offer lower risk but a lower return as well. Bearing this in mind the European high yield bond fund may be suitable as a part of a larger portfolio, but not a standalone investment.
According to Standard & Poor's the Newton International bond fund is ranked 2 out of 31 funds, based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to August 21, 2000.