Aim: Income and growth by investing in UK Government bonds and UK investment-grade corporate bonds
Minimum investment: Lump sum 25,000
Investment split: 55% UK investment-grade corporate bonds, 45% UK Government bonds
Isa link: Yes
Pep transfers: No:
Charges: Initial 3.75%, annual 1%
Commission: Initial 3%
Tel: 020 7203 3329
Scottish Widows Investment Partnership has established the Swip Sterling Bond Plus Fund which invests in UK government bonds and investment-grade corporate bonds.
Chase de Vere research manager Justine Fearns feels Swip is riding off the back of some good 12 month figures from its ten strong bond fund range with the introduction of this fund. She says: “It seems appropriate that Swip is adding to its Plus range with the Sterling Bond Plus fund. The new fund will incorporate the expertise from the existing Corporate Bond Plus and Gilt Plus funds and, with a relatively concentrated holding of 42 stocks, will target a return of 150 basis points above the iBoxx Sterling All Maturities Index. Incidentally, this target return is before charges so the actual return is likely to be less.”
Fearns notes that Swip has a very strong fixed interest team and investment process so is well placed to add to its range. “The lead manager of the new fund, Graeme Caughey will not be constrained to a benchmark so will seek to take more aggressive positions than more traditional funds. He will be able to do this immediately as the fund is 15m in size,” says Fearns.
Looking at the investment process Fearns points out capital will be invested mainly in UK government bonds and investment-grade sterling-denominated corporate bonds, but it is fair to say that is pretty much a go anywhere fund. The manager can seek returns from other sovereign, government, public and supra-national issuers, non-sterling investment-grade bonds, sub-investment-grade bonds, convertible bonds and preference shares denominated in any currency.
Fearns mentions that there are some investment restrictions investments outside conventional gilts and investment-grade sterling-denominated corporate bonds will not exceed 30 per cent of the fund’s value. This, in addition to the strong risk management strategy that the Swip bond team has in place, is something Fearns believes will help to keep volatility reasonably low.
Fearns feels this is a good addition to the range as investors are more attuned to flexible fund mandates in a bid to achieve total returns within their portfolios. She says: “This has been reflected in the bond market by huge amounts of interest afforded to “strategic” type funds that can move around the credit curve dependant on what is offering best value.
She feels the literature that is currently available is basic and covers the main points but points out that it was only available on request, which is odd, considering it was launched on 1 July. “Soft launch or not, literature should be ready if you launch a new fund,” she says.
According to Fearns the initial charge is low while the annual charge is average.
Looking at the less appealing features, Fearns says there is little to dislike about the fund based on the information provided so far. She says: “Its worth bearing in mind that there are competitors with a performance history and it will be tempting for investors to put money with a decent track record, despite the fact we know we could lose out on any early stage performance.
“Its also worth noting that some investors, rightly or wrongly, remain sceptical about Swip due to the fund manager changes that have taken place and the resulting poor fund performance.”
However, she adds that the management teams have been stable for a while and the six-month figures are showing stronger returns against benchmark and peer group than they have for a number of years. “Hopefully, this is an indicator of things to come but until a good level of consistency is shown, Swips history may also go against the Sterling Bond Plus fund.” she adds.
Fearns concludes that the main competitors will be other “strategic” type funds available such as M&G Strategic Bond, Threadneedle Strategic Bond and Alliance Dresdner Sterling Total Return.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average