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Royal London Corporate Bond

Elite Rated by FundCalibre

This fund offers access to a portfolio of predominantly, but not exclusively, investment grade corporate bonds. The manager has, over a long period of time, proved adept at delving into parts of the fixed income market where others fear to tread and identifying issues that offer superior risk-adjusted returns. The process is risk aware, with Jonathan Platt concentrating on avoiding losers rather than picking big winners, to provide an attractive and stable yield over time.

Company Description

Royal London Asset Management, established in 1988, is a wholly owned and central part of the Royal London Group and one of the UK’s leading fund management companies, managing investment, pension fund and other assets on behalf of clients. In 2013, they acquired Co-Operative Banking Group’s Asset Management business. Based in the City of London, they invest across all major asset classes and were awarded the Elite Provider for Bonds Rating in 2015.

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Fund Manager

Jonathan has been applying his long term, macroeconomic approach since joining Royal London Group in 1985. In 1992 he became Head of Fixed Interest and has been instrumental in overseeing the development of the fixed interest investment approach since. He is known for swimming against the tide and investing in high yield bonds that lack a credit rating.

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I work closely with other managers and analysts to share research and investment ideas, allowing us the resources to explore often overlooked opportunities.

Jonathan Platt - Fund Manager

The Investment Process

Jonathan believes that over-reliance on ratings agencies and inadequate benchmark construction methods lead to inefficiencies in parts of the market that a stock-picking manager can exploit, paying particular attention to the asset backed sector and unrated bonds. In addition to credit quality analysis carried out by most bond fund managers, Jonathan goes into painstaking detail, analysing covenant documents to estimate not only chance of default, but the expected recovery rate. The portfolio is well diversified, with typically over 200 names, to reduce single company credit and liquidity risk.

Risk

The fund is about a third as risky as the FTSE 100. Jonathan seeks attractive income primarily by finding mispriced opportunities in the investment grade part of the market, rather than boosting the yield by having a large allocation to lower quality bonds.

Our Opinion

What sets this fund apart from many of its peers is the manager’s ability to identify stocks with superior risk-adjusted returns in the less well researched parts of the investment grade market. The result of this is a fund with an attractive yield, but a lower risk profile than many of its sector peers. Furthermore, the strength and stability of the team give us confidence.

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