Legal & General ESG Global High Yield Bond Screene Class C - Accumulation (GBP)

Since the fund launched in May 2023, it’s tracked its benchmark well. As expected of index funds, it’s fallen behind the benchmark because of the costs involved in running the fund. However, the management tools used by the team have helped to keep performance tight to the index.

The prices and income of global bonds can go up and down with foreign currency movements, adding currency risk and volatility for UK investors. Unlike many bond funds, this one doesn’t hedge the currency risk associated with these bonds. This means that changes in currency exchange rates will impact the returns and could lead to large performance swings over the short term.

The fund has a relatively short track record, but Legal & General’s team has a longer one managing a range of other tracker funds. Their size, experience and expertise running index tracker funds gives us confidence the fund will track its index closely over the long term, although there are no guarantees.

Please note that charges are taken from capital. This can increase the income paid by the fund, but it might reduce the potential for capital growth.

Tracker funds are one of the simplest ways to invest. The fund aims to match the performance of an index, rather than beat it. Factors like withholding taxes, dealing commissions and spreads, and the cost of running the fund all drag on performance. The team work out the best way to match the performance of the index while keeping costs to a minimum. If the fund's costs are low, it's likely to track the index more closely over time.

This fund aims to track the J.P. Morgan ESG Global High Yield Corporate Index. It invests in around a third of the number of bond issuers in the benchmark. This is known as partial replication, which helps to keep costs down but should still allow the fund to track the index closely. It invests in high yield bonds issued in US Dollar, Euro and Sterling and by companies in developed and higher risk emerging markets.

The fund excludes bond issuers that earn revenue from the extraction and power generation of thermal coal, tobacco production, weapons and the extraction of oil sands. It also won’t invest in issuers that aren’t compliant with UN Global Compact principles (a UN pact on human rights, labour, the environment and anti-corruption) and excludes issuers with the lowest ESG scores.

The index applies an ESG score to each bond issuer based on a variety of ESG criteria. The fund invests more in issuers with higher ESG scores and less in issuers with lower ESG scores. The index increases the ESG scores of green bonds, which are debt issued by companies to finance projects that have clearly defined environmental benefits.

Please note as this is an offshore fund you are not normally entitled to compensation through the UK Financial Services Compensation Scheme.