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Advisers and wealth managers

Artemis High Income Fund

All data as at 31 March 2017 except where specified
  • Summary
  • About the fund
  • Performance (class R)
  • Performance (class I)
  • Composition
  • Key facts
  • Investment insights
  • Literature
  • Contact us

The fund’s aims

The fund aims to achieve an above average level of income together with the prospect of rising income and some capital growth over the longer term.

Current prices and yield
(class R)

As at noon, 21 April 2017
Bid price (quarterly dist units)79.89p
Offer price (quarterly dist units)84.91p
Distribution yield (as at 31 Mar 17)5.6%
Underlying yield (as at 31 Mar 17)4.4%

Investment information
(class R)

Minimum lump sum investment£1,000
Ongoing charge (quarterly dist units)1.32%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 1.25% and is shown as at the date of the Key Investor Information Document (KIID), where a full explanation of the fund's charges can be found.

Fund manager’s update

Trading volumes were subdued in March, despite there being plenty of news for investors to absorb. The long-anticipated hike in US interest rates occurred mid-way through the month. Although the increase had been expected, the dovish tone of the accompanying statement surprised the market and government bonds rallied. Indeed, defensive assets in general had renewed impetus after the Fed’s meeting. The failure of Trump’s bill to reform healthcare added to the mood of caution, creating concerns that the president would be unable to implement his changes to taxation or increase spending on infrastructure. Investors began to question whether the so-called ‘reflation trade’ was sustainable. In reality, the bond market has never really believed in Trump’s ability to push through reforms. If it had, higher interest rates would be priced in to a much greater extent. Instead, economic data has been the main driving force of the reflation trade, and we believe this will carry on providing evidence of a stronger global economic backdrop.

In reality, the bond market has never really believed in Trump’s ability to push through reforms.

The fund performed reasonably well during the month despite its duration (a measure of its sensitivity to a change in interest rates) being relatively short - and therefore its exposure to rallying government bond markets being relatively low. Although outflows from the high yield market, particularly in the US, weighed on some areas, credit generally held up fairly well. We took profits on our holding in CMA, the price of which was some 17% higher than where we invested only four months previously. We also added to our overweight in financials by buying junior bonds issued by Credit Suisse, Danske Bank and Nationwide. The fund also bought new issues from KCA (oil services) and Stonegate, a pub company. The KCA issue came at a large discount to its outstanding bonds thanks to volatility in the oil markets. We funded the purchases with cash and by selling very low-yielding bonds from Wagamama, Arqiva and Trinseo.

The continuing uncertainty surrounding Brexit means international investors remain wary of the UK and underweight in its equities. Despite that wariness, the UK market continued to make modest progress in March. An investor inclined to regard their glass as half full might highlight the possibility that the uncertainty surrounding Brexit will diminish in time - and that the UK market will eventually be released from quarantine. That could represent an opportunity. Some international companies are already thinking that way, capitalising on depressed valuations and a devalued currency to acquire assets in the UK. These favourable terms of trade look set to persist.

Lower bond yields benefited the more defensive parts of the market. The ripples from Kraft Heinz’s short-lived bid for Unilever provided further support. We added a new holding in BP. Its 7% yield implies some uncertainty over the sustainability of the dividend. With oil trading above $50 per barrel, we think it has done enough to rebase the portfolio and reduce costs and that cashflows can cover the dividend payments.

04 November 2016

Alex Ralph: The return of inflation …

Alex Ralph, manager of the Artemis High Income Fund, considers the implications of rising inflation on bond markets, but is still finding opportunities in financials and high yield.

Value of £1,000 invested at launch to 31 March 2017

Value of £1,000 invested at launch to 31 March 2017

Data from 9 September 2002, when Artemis took over management of the fund. Source Lipper Limited, quarterly distribution units, bid to bid in sterling to 31 March 2017. All figures show total returns with interest reinvested.

Asset allocation

Asset allocation

Source: Artemis as at 31 March 2017. Please note figures may not add up to 100% due to rounding.

Percentage growth (class R)

12 months to 31 March10.8%-2.7%5.5%10.0%20.4%
12 months to 31 March10.8%-2.7%5.5%10.0%20.4%
Please remember that past performance is not a guide to the future. Source: Lipper Limited, quarterly distribution units, bid to bid in sterling. All figures show total returns with interest reinvested.

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Alex Ralph: The return of inflation …

Security Code

About the fund

The Artemis High Income Fund combines bonds with higher-yielding equities to produce a yield greater than that of the Artemis Income Fund; as at 28 February 2017, its class I distribution yield was 5.6%*. As such, the High Income Fund is essentially a bond fund with an equity ‘kicker’ component.

So the fund looks to achieve higher than average yield, combined with the prospects of rising income and some capital growth over the longer term. And the fund offers both quarterly or monthly income.

  • Proven record: the fund has delivered a healthy yield and significant capital growth since Artemis took over its management in 2002, applying the same successful investment approach that has served the Artemis Income Fund so well.
  • Balancing risk and reward: at present, low interest rates have underpinned demand for high-yield bonds, driving up their value and sending their yields steadily lower. The managers are aware that these conditions will change – so they are prudent in their search for income.
  • An attractive regular income: the fund combines bonds with higher yielding equities to provide investors with an attractive source of income.

* Source: Artemis. Data as at 28 February 2017. The yield is for class I monthly dist and represents the Gross Distribution Yield.

Introducing the fund

Adrian Frost explains how he and fellow manager Alex Ralph make investment decisions.

Reasons to consider

The Artemis High Income Fund may be suitable for investors seeking:

  • an attractive source of income with the potential for capital growth
  • a fund that takes a higher level of risk than a ‘corporate bond’ fund but has the potential to provide a higher yield
  • a fund that invests predominantly in UK fixed-interest and preference shares

The fund’s current SRRI rating is 3.

Risk warnings

THIS INFORMATION IS FOR PROFESSIONAL ADVISERS ONLY and should not be relied upon by retail investors.
The fund's annual management charge is taken from capital. The fund may invest in fixed interest securities. The fund may invest in higher yielding bonds.
The fund holds bonds which could prove difficult to sell. As a result, the fund may have to lower the selling price, sell other investments or forego more appealing investment opportunities.
Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.
Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.
Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.

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