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Royal London Sterling Extra Yield Bond Inclusive - Class B - Income (GBP)

Sell:115.72p Buy:115.72p Change: 0.22p (0.19%)
Prices as at 7 December 2021
Change: 0.22p (0.19%)
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Prices as at 7 December 2021
Change: 0.22p (0.19%)
Prices as at 7 December 2021
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

Our view on this Fund

This fund does not feature on the Wealth Shortlist of funds our analysts believe have the potential to outperform their peers over the long term. This is not a recommendation to sell; however, if you are thinking of adding to your investments, we believe the Wealth Shortlist is a good place to start. View funds on the Wealth Shortlist »

Eric Holt and Rachid Semaoune invest in a wide range of bonds in different sectors and from different companies. They also look in areas ignored by many other bond investors and this makes the fund different from its competitors. It's a more adventurous option because high yields are typically offered by less financially secure companies. They pay a higher income to compensate for the additional risk.

Our view on the sector

Funds in this sector do what they say on the tin - they aim to pay a high income to investors. There's more than one way to achieve this though. Each fund uses a different approach and invests in different areas. Some focus on bonds. They tend to pay a fixed rate of income, but the amount varies from bond to bond. Government bonds are perceived to be lower risk and pay a lower income to reflect this. Corporate bonds offer higher yields because of the extra risk taken when lending to companies. Bonds can be less volatile than company shares, but offer less potential to grow your income and initial investment. Other funds focus on dividend-paying shares and offer more potential for long-term growth. There are also funds with the flexibility to invest in all kinds of investments. In addition to shares and bonds, they might also invest in currencies, property or commodities.

Performance Analysis

Eric Holt has performed well over the long term and delivered a much greater return than his peers since the fund launched. The fund can be more volatile than other bond funds though, which we saw during the 2008 financial crisis and at the start of 2020 amid the coronavirus pandemic. We don't think the fund is likely to offer shelter in an economic or bond market downturn.

Investments in some areas of the market that other investors tend to overlook, like unrated and higher yielding bonds have helped deliver strong returns for investors in the fund. But these investments are less liquid, meaning they can be more difficult to trade in large volumes. The increase in the fund's size in recent years may mean it is less able to take advantage of these opportunities in the future.

Investment Philosophy

The managers look to spot opportunities across the credit market by investing in a combination of investment grade, sub-investment grade and unrated bonds. They tend to focus more on the prospects for individual bonds, rather than taking wider views on things like duration (a bond's sensitivity to a change in interest rates). Holt and Semaoune therefore aim to add value for investors by investing in bonds others don't fully understand and could go on to perform well in the future.

Process and Portfolio Construction

Eric Holt and Rachid Semaoune have the help of a team of analysts and other fund managers at Royal London. They research areas of the market that most others overlook. For example, they look at bonds backed by the assets a company owns, such as property. These can be sold if the company can't repay its bonds.

They also invest in unrated bonds, which are issued by companies that don't pay for a credit rating from an agency. They pay higher yields to compensate for the extra uncertainty. Overall a large chunk of the fund tends to be invested in higher-risk high yield and unrated bonds.

As an offshore fund you're not normally entitled to compensation through the UK Financial Services Compensation Scheme.

question mark Manager Track Record Based on HL Quantitative Research

  • Royal London Sterling Extra...
  • IA £ Strategic Bond

Fund Track Record

08/12/16 to 08/12/17 08/12/17 to 08/12/18 08/12/18 to 08/12/19 08/12/19 to 08/12/20 08/12/20 to 08/12/21
Annual return 15.26% 1.73% 7.14% 0.32% 8.43%

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Fund Management Group Comment

Royal London Asset Management (RLAM) is part of the Royal London Group and was established in 1988. The acquisitions of Scottish Life In 2001, and Scottish Provident and Phoenix Life Assurance in 2008 boosted the assets under management at the group, and it now looks after a diverse range of assets including fixed income, equities, cash and property. RLAM offers a wide choice of funds for investors. The company's forte is in the provision of income portfolios and its philosophy is that all well-diversified portfolios should include an element of income.

Information about the fund

Fund manager biography

manager photo
Manager Name: Eric Holt
Manager start date: 11 April 2003
Manager located in: London

Eric Holt has extensive knowledge of UK investment grade and high yield corporate bonds, gained over a career spanning more than 30 years. He has overall responsibility for RLAM's credit research process, as well as managing the Sterling Extra Yield Bond Fund and the Ethical Bond Fund. He joined RLAM in 1999 following RLAM's acquisition of Refuge Assurance's investment team, where he had worked for the previous 20 years. Eric is a graduate of Nottingham University with a degree in mathematics and is an associate of the Institute of Actuaries.

Manager Name: Rachid Semaoune
Manager start date: 2 January 2019
Manager located in: London

Rachid Semaoune joined RLAM in February 2015 as a Credit Fund Manager within the Fixed Income Team.  Rachid joined from UBS Asset Management where he spent three years managing investment grade credit portfolios.  Prior to this he was a deputy credit fund manager at Old Mutual Asset Management.  Rachid began his investment career in 2001 at Gulf International Bank where he worked as a credit analyst and deputy fund manager. Rachid studied for a PhD in Physics at Imperial College London and holds a Postgraduate Degree in Laser Physics from the Université Paris 13.

Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used. Benchmark data provided subject to this disclaimer.
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account