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Royal London Corporate Bond - An eye for detail

Richard Wood | Thu 07 March 2019

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • The manager’s more positive about economic growth than others
  • Many corporate bond funds lost money over the last year
  • This one made a positive return though, with income reinvested

Our view

We think Jonathan Platt is an excellent fund manager. He’s got lots of experience investing in bonds and can draw from one of the best bond teams in the industry to help run the Royal London Corporate Bond fund. He's also had the help of co-manager Shalin Shah since 2017.

We like the team’s approach, rigorously analysing bonds that many other investors overlook. It's helped drive long-term returns, though it means taking on a bit more risk than some other corporate bond fund managers.

We think this slightly more adventurous corporate bond fund's a great choice for income portfolios. Platt’s experience and proven track record, combined with a low ongoing fund charge, means we're happy to see this fund on the Wealth 50 list of our favourite funds.

Performance

Jonathan Platt has run this fund since it launched in 1999. It’s since grown 149.5%* compared with 128.7% for the average fund in the Corporate Bond sector. Over the past year it's made a small gain and outperformed the sector. Performance was boosted by the income paid by the underlying bonds. Past performance isn't a guide to future returns though.

Over the long run we expect the fund to do better than the average fund during the good times, though it might not hold up quite so well when there's a broader setback.

Jonathan Platt career track record

Past performance isn't a guide to the future. Source: Lipper IM* 29/3/1999 to 28/2/2019

The fund currently yields 3.54%. This is variable and not guaranteed, and the fund can take its charges from capital. This increases the yield but reduces growth potential.

Annual percentage growth
Feb 14 -
Feb 15
Feb 15 -
Feb 16
Feb 16 -
Feb 17
Feb 17 -
Feb 18
Feb 18 -
Feb 19
Royal London Corporate Bond 11.1%* -2.6%* 11.2%* 3.5% 2.1%
IA £ Corporate Bond 9.7% -2.2% 11.7% 1.8% 1.3%

Past performance is not a guide to the future. Source: Lipper IM to 28/2/2019

*Performance data for Feb-14 to Feb-17 relates to the ‘inclusive’ share class

Outlook

There’s been a lot for corporate bond investors to wrestle with recently. Some see rising interest rates in the US as a sign of things to come in other parts of the world. Global growth is also expected to slow. Neither is good for corporate bonds.

Platt thinks some of these concerns are valid but overdone. He expects UK interest rates to remain relatively low in 2019 and he doesn’t think global growth will slow as much as some predict. As a result he’s happy to take on a little more risk than some other bond fund managers. Part of the fund is invested in higher-risk high yield bonds, for example.

He also invests in some unrated bonds. These are issued by companies that don't pay to get a rating from a credit agency. They're dismissed by a lot of investors, but Platt and his team carry out their own research to check if the quality of these bonds is high enough to be considered for the fund. These bonds tend to pay a higher income to compensate for the fact they're seen as higher risk. The fund currently invests in unrated bonds issued by well-known companies like John Lewis and British Land.

The fund has large investments in banking and insurance bonds. Platt thinks this part of the market offers more value and attractive yields compared with some other sectors. He recently bought Legal & General, Munich Re and HSBC bonds. He sold bonds issued by social housing firm Peabody, insurer Metlife and utility company Vattenfall.

Seeking to get enough return for the risk you’re taking is an important part of investing. Royal London’s expertise in analysing bonds unknown to most investors has helped them get this balance right.

Find out more about this fund including charges

Royal London Corporate Bond Key Investor Information


Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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