Corporate Bonds  

Fund Review: Smith & Williamson Short-Dated Corporate Bond

This article is part of
Fund Review: Sterling Corporate Bonds

Turning to performance, Mr Kenny says: “If anything, the investment grade corporate bond market has been fairly well behaved over the past year. We’ve got 71 different companies we lend to so we try to be selective. We’ve not had any real surprises or any big detractors from performance. Nor should we have, it’s all about having a well-diversified portfolio.”

Over the past 12 months to November 28 the fund (B sterling share class) has returned 1.8 per cent, beating the Libor GBP 3 Month index which generated a 0.5 per cent return, but lagging the FO Fixed Interest – Global sector average of 20.2 per cent, according to FE Analytics. 

The fund has performed consistently over the longer term, delivering an 11.8 per cent return to investors, compared with the Libor GBP 3 Month index return of 3.1 per cent, while the sector average return was 31.7 per cent.

“With the corporates we lend to, we equally weight each position – or at least we target the equally weighted approach,” he notes. “In investment grade, we don’t think you need to worry about default rates but you do need to worry about pricing risk. And that means unexpected events that you can’t predict. You saw the ripples with the Volkswagen device scandal.”