Fixed Income  

Sector analysis: Corporate Bonds

Corporate bonds are having a tough time of it at the moment, with September seeing net retail outflows of £116m, making it the worst-selling sector of that month, according to the Investment Management Association (IMA). Outflows of £262m in June represents the worst month in the past year, but negative net sales have been occurring consistently since November 2012.

The worst-performing corporate bond fund was the Smith & Williamson Fixed Interest Trust which, over the past year, returned £977 on an initial £1,000 investment. Second place is barely any better, with Standard Life AAA Income R Acc delivering just £1 more over the year.

These figures show poor short-term performance but more hopeful five-year figures, with the Smith & Williamson Fixed Interest Trust returning £1,460 over five years.

Even at the top end of the sector, the annual return is hardly stellar. The FP Brown Shipley Sterling Bond Inc gave an annual return of just £1,090. If this represents the current highs of corporate bonds, it is understandable that investors would not feel motivated by performance.

Only the bottom six funds in the sector failed to return on the initial £1,000 investment, while all 29 funds in the UK Gilts IMA sector lost money. This shows that while the perceived ‘safe’ sector of bonds as a whole is performing particularly poorly at the moment, corporate bonds are at least outperforming the consistent disappointment of government bonds.

Top And Bottom Performing Funds In The Corporate Bond Sector Based On An Initial £1,000 Investment
Top 5
FP Brown Shipley Sterling Bond Inc£1,090
Premier Corporate Bond Monthly Income A£1,082
Rathbone Ethical Bond R Acc£1,071
Old Mutual Corporate Bond Acc£1,066
IP Corporate Bond Acc£1,066
Bottom 5
Smith & Williamson Fixed Interest Trust£977
Standard Life AAA Income R Acc£978
Legg Mason Global Blue Chip Bond A Inc£984
Investec GSF InvGrd Corp Bd A Inc USD£992
Henderson Instl Long Dated Credit A Inc£994
Sector Average£1,033
Data one year to 11 November 2013. Source and copyright: Money Management