SOCGEN ASSET MANAGEMENT
Corporate Bond Fund
Type: Unit trust.
Aim: Income by investing in corporate bonds.
Minimum investment: Lump sum £1,000, monthly £50.
Investment split: High-grade sterling-denominated corporate bonds 80 per cent, fund manager's discretion 20 per cent.
Yield: 5.5 per cent.
Isa link: Yes.
Pep transfers: Yes.
Charges: Initial 3.5 per cent, annual 1.25 per cent.
Commission: Initial 3 per cent, renewal 0.5 per cent for Isas and Pep transfers only.
Tel: 0808 1004432.
Suitability to market 6.3
Investment strategy 5.8
Past performance 5.5
Companys reputation 6.5
Product literature 5.8
SocGen Asset Management has introduced the sterling corporate bond unit trust, a fund that aims for income by investing in sterling-denominated corporate bonds.
Looking at how the fund fits into the market, Bulgin says: "This is another attractive fund, offering above average levels of income for investors who are looking for above average returns with an acceptable level of risk."
Callaway says: "This completes the SocGen range of funds, which is now quite a packed field. One wonders why the company has felt the need to launch this fund, as there has been a low take-up of equity funds during what has been a volatile period. It could be a case of SocGen saying bung out a corporate bond fund to mop up some money."
Meadows says: "The fund is typically aimed at the retired market wanting a level of regular income against a background of falling rates. It is now competing in a sector of the market where the demand could overstep the supply if rates continue to fall."
Rawnsley says: "This is an opportune moment to launch into the marketplace due to the present uncertainty and negative returns in the UK and global marketplace. The fund fits nicely between sector unit trusts, equities and zeros dividend preference shares."
Moving on to the type of client that the fund is suitable for, Rawnsley says: "This is for clients who are looking to maintain and stabilise a higher than normal income from a less volatile vehicle."
Bulgin says: "This will appeal to the relatively risk averse investor who is looking for income."
Callaway says: "I am not really sure about what kind of client would go for this product. I have never been totally convinced by corporate bond products. These are not low risk, the yields are never marvelous and your capital is always at risk. It could be best for higher rate taxpayers looking for stable income and who are not too worried about any capital value fluctuations."
Looking at the strong points of the product, Meadows cannot see any. He says: "There are those, probably SocGen included, who would say that any publicity is good publicity but the front cover showing Nicola Horlick? Do me a favour, prima donnas in financial services."
Bulgin says: "It offers quarterly income and the scope for some capital growth from convertibles."
Rawnsley is more positive. He says: "There are low entry points for single and regular contributions and above all else this is a new fund at an optimum time. There are a good spread of holdings and there are regular payments."
Turning to the other side of the coin and looking at the drawbacks of the fund, Callaway says: "There is a low yield of 5.5 per cent. Plus the charges in the first year are 3.5 per cent and 1.25 per cent which equals 4.75 per cent – too expensive as youd kiss goodbye to one years return."