Investments  

TMI bond funds bid to grow investment

Thomas Miller Investment has launched two Dublin-domiciled Ucits bond funds as part of its strategy to grow its collective investment business.

The TMI Sterling Bond Fund and TMI US Dollar Bond Fund are designed to pay dividends in April and October of each year, while also focusing on the preservation of capital over the long term.

The Sterling Bond Fund – which has £13m in assets – is invested to the tune of almost 30 per cent in the financial sector, while almost 23 per cent and 18 per cent of the fund are invested in the industrial and utilities sectors respectively.

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Meanwhile, a quarter of the £38.7m US Dollar Bond Fund is invested in financial, 19 per cent in non-cyclical sectors and 11.7 per cent in communications sectors.

The funds are co-managed by James Penn and Rob Brockbanks.

Mr Penn, who joined the investment manager in 2010 and began managing TMI bond funds in May of that year, has more than 19 years of investment experience.

Head of dealing Mr Brockbanks has managed the TMI liquidity funds since 2008. He has been closely involved in both the setting up and management of the bond funds since 2010.

Earlier in July, TMI launched a Diversified Assets Fund.

Provider view

Carolyn Gelling, director and head of collective investment funds at TMI, said: “We are glad to be able to offer these bond funds which will allow access to our institutional fund management and research capabilities and expertise in fixed-income asset selection within a liquid, daily dealing solution.

“TMI has a long history and successful track record in fixed-income investing, and these funds are designed to offer access to an actively managed portfolio of diversified fixed-income securities, which has the flexibility to respond to anticipated changes in interest rates and use various strategies to preserve capital while seeking a consistent dividend.”

Adviser view

David Stealey, senior financial planner at Vale of Glamorgan-based Romilly Financial, said: “I do think that there is a demand for these types of products but it depends on what the return looks like. If you are going for capital preservation, clients will probably be more warming to deposit options or a savings account. I also think the charges here are too excessive for this type of investment.

“It is important to manage the investor’s attitude to risk with these types of investments. Just because the funds invest in bonds it does not mean that they are low-risk. Capital adequacy issues still apply.”

Charges

Both funds will charge an investment management fee of 0.75 per cent and ongoing charges of 1.15 per cent.

Verdict

As with all investments, bond funds are subject to risk – but arguably less than funds investing in stocks and shares. The trade-off for a ‘safer’ investment proposition is high charges. Here, the price of the funds may prove too steep for many investors.

While bond funds may be viewed as a low-risk investment by investor, there are a number of caveats in play. Interest rate risk is one of them. Bank of England governor Mark Carney has hinted that base rates are likely to rise sooner than many experts have predicted.