Paul Causer and Paul Read manage a range of fixed interest funds and have been at the helm of the Invesco Perpetual Corporate Bond Fund since its launch over twenty years ago.
The fund is primarily invested in lower-risk investment-grade corporate bonds, with around 60% of the portfolio allocated to this area. The managers have been cautious in their outlook for a number of years as they felt economic growth must remain weak for bonds to continue performing well, which they did not anticipate. To reflect this view, the managers held relatively short-dated bonds which are less sensitive to changes in interest rates. This has resulted in pedestrian returns relative to the benchmark as longer-dated bonds have risen strongly over the past few years.
However, the managers have recently become more positive towards selected areas of the corporate bond market and took advantage of recent weakness in bond prices to increase exposure to higher-risk bonds and reduce the defensive portion of the portfolio. Most of the investments have been made in corporate bonds issued by financial companies such as Aviva and Legal & General. These bonds fell in value over the past few months as investors fretted over the prospects for banks and financial companies in a low-growth world with less demand for their products and services. However, the managers felt this speculation was wrong and took the opportunity to invest with yields at more attractive levels.
The fund has returned 121.7% over the past 10 years in comparison to returns of 80.5%* for the sector and currently yields 4.17% (variable and not guaranteed). Past performance is not a guide of future returns.
|Annual percentage growth|
| April 11 -
| April 12 -
| April 13 -
| April 14 -
| April 15 -
|IA £ Corporate Bond||5.57%||11.04%||1.03%||10.4%||-1.12%|
|Invesco Perpetual Corporate Bond||2.44%||13.27%||4.53%||5.7%||-0.65 %|
Source: Lipper IM to *01/04/2016. Past performance is not a guide to future returns.
Paul Causer and Paul Read are both highly experienced bond investors and are two of our favoured fund managers for investing across the fixed income spectrum. Within this fund, which invests in investment grade corporate bonds, we are confident in the managers' ability to read the market correctly more often than not and add value over the long term. The managers are able to make use of derivatives which adds risk.
The managers are willing to back their convictions and their views can, at times, be at odds with other investors, which can cause performance to deviate from their peers. In our view, this fund remains a good choice for long-term investors seeking exposure to investment grade corporate bonds and the fund remains on the Wealth 150 list of our favourite funds across the major sectors.