Royal London Sterling Extra Yield Bond Fund A

Sterling Bonds

Rated Fund 2013-19. High yield with an emphasis on security

This fund won Money Observer’s Best Larger Sterling Bond Fund award in 2014 and was highly commended in 2016 and 2018. It certainly lives up to its name with its yield of almost 6%. Income is paid quarterly.

The fund is highly diverse, at almost 200 holdings. It is managed by Eric Holt, who has three decades of experience in bond markets. He offers a different perspective on bond market investing because he focuses on more esoteric, undervalued and overlooked areas, including bonds without a credit rating.

At the end of 2018, almost 40% of the portfolio was in unrated bonds. A further 35% was in sub-investment-grade stock.

Holt aims to provide investors with a high yield without taking the degree of risk normally associated with high-yield funds. For this reason, he favours bonds that are secured against specific assets, such as property or cash flow.

Holt looks to exploit bond market ine­fficiencies. He believes that by considering a wider investment universe than many of his peers, he can uncover value in many areas that are often overlooked, including unrated and asset-backed bonds and loans.

He does not rely on bonds’ credit ratings; the main question for him is whether there is su­fficient reward for the risk being taken.

In practice, this means the portfolio will hold untypical bonds, such as the aforementioned unrated bonds, smaller issue size bonds, sub-investment-grade bonds and non-sterling bonds, where he believes valuations are attractive. He says this approach also allows him to focus on investing for the longer term.

Narrative and ratings content all as of 01 January 2019.

See all Money Observer rated funds
Name
Royal London Sterling Extra Yield Bond Fund A
Manager
Royal London Unit Trust Managers Ltd
Type
Open Ended Investment Company
ISIN
IE0032571485
Sector
£ Strategic Bond
Launched
11/04/2003
OCF
0.83 %
Risk Rating
3
3 Year Sharpe
2.29
3 Year Alpha
7.60
Yield
5.6 %
Benchmark
FTSE Act UK Cnvt Gilts Over 15 Yr TR GBP
The fund’s objective is to achieve a high level of income and to achieve gross redemption yield of 1.25 times the gross redemption yield of the FTSE Actuaries British Government 15 year index. The above objective applies to Class A and Class B shares in each of the sub-funds. The sub-fund seeks to achieve its investment objective by investing at least 75% of its assets in Sterling denominated securities traded principally on the London Stock Exchange or over the counter markets. The sub-fund may also invest up to 25% of its assets in non-Sterling denominated securities traded principally on European, U.S., Canadian and Australian exchanges or over the counter markets.
Holding %
EI Group Plc 6.38% 2.27 %
Co-operative Group Ltd 7.5% 2.22 %
Santander UK PLC 10.06% 2.17 %
Electricite de France SA 5.88% 2.15 %
Intergen NV 7.5% 2.01 %
Amedeo Air Four Plus 1.74 %
Anglian Water (Osprey) Financing Plc 4% 1.61 %
Heathrow Finance plc 3.88% 1.52 %
Prudential plc 5.7% 1.41 %
Centrica plc 5.25% 1.40 %
Region %
United Kingdom 69.60 %
Europe - ex Euro 17.51 %
Canada 7.43 %
Sector %
Financial Services 49.05 %
Energy 46.19 %
Name
Royal London Unit Trust Managers Ltd
Address
EC3V 0RL, London, United Kingdom
UCITS
Yes
Legal Structure
Open Ended Investment Company

Managers

Rachid Semaoune
Joined 01/02/2019
Eric Holt
Joined 04/11/2003

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.

Data provided by Morningstar.

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