Royal London Sterling Extra Yield Bond Fund A

Sterling Bonds

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
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
2.12
3 Year Alpha
5.52
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 %
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 %
Region %
United Kingdom 68.10 %
Europe - ex Euro 20.94 %
Canada 5.60 %
Sector %
Financial Services 55.76 %
Energy 39.03 %
Industrials 5.21 %
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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