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Virgin warns on corporate bond risks

Virgin Direct is warning invest ors to be cautious when choosing UK corporate bonds, following its survey on 41 funds.

It looked at bond fund quartile performance over five rolling 12-month periods bet ween 1995 and 2000. The survey found over two-thirds of funds with a five-year record had an average annual quartile ranking of more than two, indicating a high degree of volatility.

Only seven out of 41 funds consistently had a quartile ranking of less than two.

Virgin Direct says UK corporate bond funds can be a rollercoaster ride. Marketing manager Gordon Maw says: “The income deals that look too good to be true quite often are. You can rarely have your cake and eat it when it comes to income. Those funds taking a high-risk approach to get the highest advertised yield are now having to erode the capital to maintain those numbers.”

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