Scottish Widows High Income Bond A

A hybrid bond portfolio investing 65-80% in US high yield bonds.

  • 78.58p
    Price (Inc)

    These are the shares in the fund that pay out an income to clients. The income is made up of the total dividends – the money a company can pay out to its investors – from the companies in the fund.

  • 237.80p
    Price (Acc)

    These are the shares in the fund that don’t pay out an income to clients. Any dividends – the money a company can pay out to its investors – are reinvested into companies in the fund. Despite no income, the shares should be worth more over time. Good incentive, eh?

  • 3.50% 0.00%

    Initial charge

    Some funds charge you when you first invest, which is aptly known as the initial charge. They’re usually between 3-5% but at Bestinvest, we usually don’t charge you a penny!

  • 1.50%
    Annual management charge

    This is how much the fund management company charges to run the fund. It’s like paying a babysitter, dog sitter or house sitter (that makes well-informed, heavily researched changes to improve your baby/dog/house when needed).

  • 1.62%
    Ongoing charges

    This stands for Ongoing Charges Figure. It’s the cost of running a fund and includes admin fees, manager fees, administration costs, etc.

  • 5.00%
    Yield

    How much the fund is currently paying out in income to investors. It’s NOT to be confused with the overall growth of a fund – a very different thing indeed. It’s also NOT a guarantee of future pay-outs, just a snapshot. This is more what it’s not than what it is…

Prices as at 12 October 2020, fund data last updated 30 November 2009

The fund aims to produce total returns from the income generated from a portfolio of predominantly US higher yield corporate bonds (typically up to 80% of the portfolio). The fund may also invest in other fixed interest securities, including bonds issued by companies and governments operating in the USA, the UK and Europe. The higher yield portion is more actively managed, with individual holdings rigourously analysed, where as the government bond portion tends to be more passively managed.

Fund summary

Sector £ High Yield
Structure OEIC
Launched August, 1999
Size £148m
Yield 5.00%
Charging basis Capital
Dividends paid 15th day of each month

Charges

Standard initial charge 3.50%
Initial charge via Bestinvest 0.00%
Additional bid/offer spread 0.00%
Annual management charge 1.50%
Ongoing charges figure 1.62%

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Investment process

Unusually this fund gains its high yield bond exposure from the US market, with the balance usually invested in UK government bonds, although the fund has scope to invest in and fixed interest securities (bonds) issued by companies and governments operating in the USA and Europe. The neutral fund position is 65% CSFB High Yield Index and 35% Salomon UK Gilt Index. The high yield proportion of the fund is managed on an unconstrained basis relative to benchmark basis. The investment process initially scrutinises the quality of a company's business model to assess their ability to meet interest payments, the availability of asset coverage is also an important factor. The objective being to build a higher yielding portfolio with a margin of safety. The government bond proportion of the portfolio tends to be managed more passively.

Until April 2011 management of the high yield corporate bond element of the fund was outsourced to Mackay Shields, who are a firm of New York based fund managers specialising in bonds. Scottish Widows now manage all the investments of this fund, with fund manager responsibility now delegated to Kevin Matthews who is Head of Scottish Widows' US High High Yield team in New York. In accordance with standard Bestinvest policy we removed our two star rating at the time, as the new manager didn't have an identifiable track record. Note approximately 65% of the fund is likely to be invested in US high yield corporate bonds, typically higher risk bonds, which pay higher interest payments. Therefore the fund should be viewed only for the long term or as a small part of a balanced portfolio.

Manager research

Average monthly relative returns

  • 15/16 -0.40%
  • 16/17 0.19%
  • 17/18 -0.30%
  • 18/19 -0.32%
  • 19/20 -0.24%

Bestinvest MRI

  • 3 years -0.28%
  • 5 years -0.21%
  • Career -0.26%
  • 3 years 37.50%
  • 5 years 40.50%
  • Career 25.50%

Performance figures are based on the average of monthly percentage returns relative to the benchmark index.

Kevin Mathews

Mathews is Head of US High Yield where he is portfolio manager responsible for the high yield team in New York. Mathews previously worked at F&C Investments where he was the Head of Global High Yield managing institutional accounts and funds. He holds a BS in Finance from the University of Illinois and an MBA in Finance from Drake University.

Track record

Kevin Mathews has 9.5 years experience of managing mutual funds in this sector. Over this period the average monthly return relative to the benchmark index has been -0.26%. During the worst period of relative performance (from June 2014 - March 2020) there was a decline of 35% relative to the index. The worst absolute loss has been 17%.

Periods of worst performance

Absolute -17.00% (January 2020 - March 2020)
Relative -35.00% (June 2014 - March 2020)

About the MRI

Our unique indicator: the Bestinvest Manager Record Index (MRI) measures the likelihood that the fund manager is adding value through their decisions. It is based on their performance record over the course of their career, adjusted for the amount of risk taken. MRI is an important contributor to our fund rating system but it is also vital to take account of qualitative factors. It is also very important to select funds to form a cohesive portfolio with an appropriate overall risk level.

Allocation

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Top 10 holdings

Data accurate as at 30 June 2020

2.32% United States Of Amer Treas Bills 0% Tb 16/07/20 Usd100
2.15% Us Long Bond Sep 20 (Usu0)
1.61% Cco Hldgs Llc/Cap Corp 5.75% Bds 15/02/26 Usd1000
1.17% Hca Healthcare Inc 5.875% Bds 15/02/26 Usd2000
1.15% Kraft Heinz Foods Co 4.875% Bds 01/10/49 Usd2000
1.14% Dell International Llc 5.3% Bds 01/10/29 Usd1000
1.07% Tenet Healthcare Corp 4.625% Nts 15/07/24 Usd1000
1.04% Telecom Italia Capital 6% Nts 30/09/34 Usd1000
.87% Tutor Perini Corp 6.875% Bds 01/05/25 Usd2000
.87% Sensata Technologies 4.375% Bds 15/02/30 Usd1000
Source: Trustnet

Sector breakdown

BB 43.00%
B 29.00%
BBB 15.00%
CCC 8.00%
Non-Rated 3.00%
AA 2.00%

Portfolio

Circa 60-80% US High Yield Bond, balance Government bonds. There are usually between 120 -150 high yield names in the portfolio. Currency exposure is fully hedged to sterling.

Constraints

Maximum industry / sector weights are double the benchmark level. A minimum of 20% must be invested in Gilts.

Key Investor Information - Income

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Key Investor Information - Accumulation

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