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The Royal investment philosophy is that low profile bonds consistently provide better risk / return characteristics than higher profile ones, consequently more time is spent analysing this part of the market. The return target was chosen on the basis that it is realistically deliverable over the longer term. There is no formal fund benchmark, sector weightings are monitored, but not significantly controlled on the basis that benchmark weightings can add to absolute portfolio risk.
There are no formal constraints on the size of an issue - many attractive issues being less than £100m. Although the fund may operate along the yield curve most of the securities held have maturity over 5 years, reflecting the issuer’s requirements.
The Royal manage their funds on a team basis; whilst the fund manager is responsible for stock selection, he has to operate within duration, sector and credit quality parameters agreed by the team. He retains the discretion to modify these, but only by a 5% maximum. Dealing is daily.