By ROBERT HARLEY 27/09/2006
The Preference and Bond fund has a specific income target of 1% over 10 year Gilts, whilst at the same time attempting to achieve capital preservation. Although the fund operates within certain constraints, these provide for a moderately more aggressive structure than mainstream corporate bond funds by allowing a higher allocation to high yield and quasi equity securities; distributable income is boosted by deducting charges from capital. This type of fund structure would suit investors seeking more of an emphasis on income distributions, historically this has been combined with corporate bond fund levels of volatility.
The Strategic Bond fund adopts a total return approach through capital return and income by investing across all the main fixed income asset classes. Income levels may consequently fluctuate depending on how the fund is positioned. To enable the fund to maximise these returns, the manager operates under much broader investment parameters than on the Preference and Bond fund.
Both funds are awarded a three star rating.