Invesco Perpetual Tactical Bond Accumulation Units

It has been a tough year so far for the Invesco Perpetual Tactical Bond Fund - Paul Read and Paul Causer continue to favour bonds issued by financial companies, including banks, which have been sold heavily in the wake of continued euro zone debt worries. Nevertheless, they retain their conviction that the sector stands to deliver excellent returns over the longer term, supported by a combination of banking reforms, the introduction of Basel III guidelines and rising capital levels.

The fund also has exposure to higher risk high yield bonds, which underperformed the general corporate bond market. Elsewhere, the fund has a number of positions in convertibles (bonds which can be converted into shares) as they believe these offer attractive yields along with the potential for equity upside. Conversely they see little value in government bonds at their current levels. Earlier this year they took advantage of a rally in Spanish and Italian government bonds to sell their holdings - a move which was well timed given subsequent events in the euro zone.

The fund retains a high cash weighting, which can be put to work when opportunities arise, and in the meantime should help to dampen the overall volatility of the portfolio. The fund has had a tough time, which serves to illustrate that all investments can fall as well as rise in value, and even strategic bond funds can lose money if the managers make the wrong decisions. Nevertheless, we are confident in the abilities of Paul Read and Paul Causer. They remain one of the most experienced and skilful teams in the bond market, and if their views on financial sector bonds are proven correct, the fund could be set for a strong period of performance. It remains on the Wealth 150 list of our favourite funds in each sector.