Royal London Sterling Extra Yield Bond Fund A
Rated Fund 2013-20. Aims for high yield with an emphasis on security
A stalwart of our Rated Funds, Royal London Sterling Extra Yield Bond clinched its fourth Money Observer award as Best Sterling Bond fund in 2019, having been highly commended in 2018. It was highly commended in the Best Larger Sterling Bond fund category in 2016, when we judged larger and smaller funds separately, and took the title in 2014.
Eric Holt, who has three decades of bond market experience, has run the fund since 2003. Rachid Semaoune is co-manager. The managers aim to provide investors with a high yield (5.5% at present, paid quarterly) without taking the degree of risk normally associated with high-yield funds. For this reason, they favour bonds secured against specific assets such as property or cash flow.
The managers look to exploit bond market inefficiencies, and believe that by considering a wider investment universe than many of their peers they can uncover value in many areas that are often overlooked and undervalued.
They do not rely on bonds' credit ratings. The main question for them is whether there is sufficient reward from an investment to justify the associated risks. This means the portfolio will hold untypical bonds, such as unrated bonds, sub-investment-grade bonds, smaller issue-size bonds and non-sterling bonds. At the end of 2019, 31% of the portfolio was in unrated bonds. A further 40% was in sub-investment-grade stock. Almost 23% was denominated in a currency other than sterling. The fund is highly diverse, with almost 240 holdings.
Narrative and ratings content all as of January 2020.See all Money Observer rated funds
|Electricite de France SA 5.88%||2.17 %|
|Co-operative Group Ltd 7.5%||2.10 %|
|Centrica plc 5.25%||2.05 %|
|Santander UK PLC 10.06%||1.95 %|
|EI Group Plc 6.38%||1.92 %|
|Prudential plc 6.34%||1.86 %|
|Intergen NV 7.5%||1.83 %|
|Anglian Water (Osprey) Financing Plc 4%||1.53 %|
|Heathrow Finance plc 3.88%||1.46 %|
|Phoenix Group Holdings 5.75%||1.35 %|
|United Kingdom||68.10 %|
|Europe - ex Euro||20.94 %|
|Financial Services||55.76 %|
Eric joined Refuge Assurance’s investment team in 1979, having been initially recruited into the Actuarial department. He has overall responsibility for RLAM’s credit research process and has extensive knowledge of UK corporate bonds, which has been his main focus for twenty years. Eric is a graduate of Nottingham University with a degree in mathematics and is an associate of the Institute of Actuaries.
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