The fund aims to provide income and capital growth.
Investment policy and strategy
Core investment: The fund is a flexible fund, where at least 50% will be invested in bonds. The fund manager has the freedom to invest across a broad range of bonds (government bonds, investment grade corporate bonds, and high yield bonds), wherever the greatest opportunities can be found. These bonds can be denominated in any currency. Typically, the fund invests in bonds issued by governments or companies in developed markets, although it can also invest in bonds from emerging markets. The fund holds these assets directly and indirectly through derivatives.
Other investments: The fund may invest a portion (up to 20%) in company shares when the fund manager believes that a company’s shares offer a better return than its bonds. The fund may also hold money market instruments (for example, debt due to be repaid within a year) and cash.
Use of derivatives: Derivatives may be used to gain exposure to the fund’s core and other investments, to reduce risks and costs and to manage the impact of changes in currency exchange rates on the fund’s investments.
Derivatives may also be used to generate market leverage (in other words, gain exposure to investment exceeding the value of the fund).
Strategy in brief: The fund manager selects investments based on an assessment of a combination of macroeconomic, asset, sector and stock-level factors. Spreading investments across issuers and industries is an essential element of the fund’s strategy and the manager is assisted in the selection of individual bonds by an in-house team of analysts.
Bonds: Loans to governments and companies that pay interest.
Derivatives: Financial contracts whose value is derived from other assets.
High yield Bonds: Bonds issued by companies considered to be riskier and therefore generally paying a higher level of interest.
Investment grade corporate Bonds: Bonds issued by a company with a medium or high credit rating from a recognised credit rating agency. They are considered to be at lower risk from default than those issued by companies with lower credit ratings.
Risks associated with the fund
The value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise. There is no guarantee the fund will achieve its objective, and you may not get back the amount you originally invested.
When interest rates rise, the value of the fund is likely to fall.
The value of the fund may fall if the issuer of a fixed income security held is unable to pay income payments or repay its debt (known as a default).
The fund may use derivatives to gain exposure to investments exceeding the value of the fund (leverage). This may cause greater changes in the fund’s price and increase the risk of loss.
The fund may use derivatives with the aim of profiting from a rise or a fall in the value of an asset (for example, a company’s bonds). However, if the asset’s value varies in a different manner, the fund may incur a loss.
Changes in currency exchange rates will affect the value of your investment.
If the share class is hedged (H share class), it aims to mirror the performance of another share class. We cannot guarantee that the hedging objective will be achieved. The hedging strategy will limit holders of the hedged share class from benefiting if the hedged share class currency falls against sterling.
Where market conditions make it hard to sell the fund’s investments at a fair price to meet customers’ sale requests, we may temporarily suspend dealing in the fund’s shares.
Some transactions the fund makes, such as placing cash on deposit, require the use of other financial institutions (for example, banks). If one of these institutions defaults on their obligations or becomes insolvent, the fund may incur a loss.
The Fund allows for the extensive use of derivatives.