We have taken the decision to remove the Royal London Sterling Extra Yield Bond fund from the Wealth 50. We continue to have high conviction in the ability of fund managers Eric Holt and Rachid Semaoune. But we believe the fund should remain at a size which allows the managers to make the most of the opportunities presented to them, and so we have decided to remove it from the Wealth 50.
This is not a decision based on a change in our view of the managers, or a reflection of their performance. It is important to note that this decision has not been impacted by recent stock market movement.
Holt and his team are experienced in investing in more unfamiliar areas and have delivered strong returns for investors over the long term. They hold a wide range of bonds in the fund so returns don't rely on the performance of a single holding. Since the fund was added to the Wealth 50 (formerly Wealth 150) in September 2005 the fund has returned 103.5%* versus the IA £ Strategic Bond sector’s 93.1% gain. Past performance is not a guide to the future.
Why is the fund being removed from the Wealth 50?
As the fund has performed well, it has also grown significantly in size. We feel that if the fund continues to grow, in future this may make it more difficult for the managers to deliver strong returns to investors.
The managers have an investment philosophy of investing in areas of the market that most other investors overlook, including in higher-risk unrated and higher yielding bonds. These areas of the market have helped deliver strong returns for investors in the fund, but are less liquid, meaning they can be more difficult to trade in large volumes.
There’s the potential that if the fund keeps growing, the size of the fund could limit Holt and Semaoune’s ability to add value in future in the areas that they have historically managed to exploit successfully. We recognise that in continuing to have the fund on the Wealth 50 the fund is likely to grow larger and this might not be in the best interests of existing holders of the fund in our view.
This research note is not personal advice, or a recommendation to make any changes to a portfolio. Investors should make sure any investments match their investment goals and attitude to risk. If you're not sure if an investment is suitable for your circumstances, please seek advice. Like all investments, the fund can fall in value as well as rise so investors could get back less than they invest.
|Annual percentage growth|
| Apr 15 -
| Apr 16 -
| Apr 17 -
| Apr 18 -
| Apr 19 -
|Royal London Sterling Extra Yield Bond||0.7%||17.4%||8.4%||5.4%||-6.8%|
|IA £ Strategic Bond||0.4%||8.3%||1.6%||2.7%||1.2%|
Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2020.
As this is an offshore fund investors are not normally entitled to compensation through the UK Financial Services Compensation Scheme.