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Fixed interest funds

Fixed interest funds are also known as bond funds. Managers of these funds essentially give loans to companies or governments in return for a fixed rate of interest. Loans to companies are known as corporate bonds. Bonds are given a risk rating by ratings agencies. If the ratings agency believes there is a high risk that a company or government won't be able to repay their loan, the bond is called high yield (as the fixed interest paid is generally higher to compensate for the risk involved). If the ratings agency think the risk is low, the bond is known as investment grade. Government bonds from developed countries are generally deemed to be the least risky. Some funds can invest in all these types of bonds (and are known as Strategic Bond funds), whereas others are limited to one or two areas.