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Advisers and wealth managers

Artemis Strategic Bond 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 seeks to achieve a combination of income and capital growth by investing predominantly in fixed income markets.

Current prices and yield
(class R)

As at noon, 21 April 2017
Bid price (quarterly acc units)92.01p
Bid price (quarterly dist units)56.54p
Offer price (quarterly acc units)97.54p
Offer price (quarterly dist units)59.94p
Distribution yield (as at 31 Mar 17)3.5%

Investment information
(class R)

Minimum lump sum investment£1,000
Ongoing charge (quarterly acc units)1.08%
Ongoing charge (quarterly dist units)1.08%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 1.0% 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 managers’ update

Government bonds
Although the US Federal Reserve increased interest rates in March, the statement accompanying the decision was deemed to be relatively dovish - so the decision did nothing to reduce demand for government bonds. In Europe, the ECB’s apparent hawkishness was tempered by some judicious leaks implying that interest rates will stay very low. Meanwhile, the UK triggered Article 50. The associated uncertainty supported demand for gilts, despite mounting inflation.

Government bonds are still perplexing us.

Investment-grade bonds (those rated ‘BBB’ and above)
Issuance was quite strong in March. That a number of banks issued junior bonds tempered an otherwise strong month for bank bonds. Meanwhile, hybrid bonds struggled a little towards the end of the month due, in part, to weaker commodity prices.

High-yield bonds (rated below ‘BBB’)
The US high-yield market came under pressure from some substantial fund redemptions, much of which was related to weaker commodity prices. The pressure was less evident in Europe.

Activity
We sold some positions where prices had become rather high and where yields, by extension, had become rather too low. For example, the yield on a bond issued by International Petroleum that will mature in four years had fallen below ½% and its price had risen above 120 (it will redeem at 100). It therefore provides minimal yield and will automatically lose 20 points of capital four years from now - so we decided to bank a handsome profit and reinvest the proceeds in bonds issued by Gazprom, Danske Bank and Virgin Money yielding 4.25%, 6.125% and 7.5% respectively. For similar reasons we sold Arqiva and took healthy profits in CMA’s bonds. We retained our short position in gilts - this continued to act as a drag on returns over the month.

Outlook
Government bonds are still perplexing us. Economic growth remains healthy, inflation numbers have been rather high and interest rates in the US have been raised and will go up further. Yet government bonds carry on performing well. We are, for now, retaining our short position in gilts as we feel fundamentals will eventually come to the fore. Further increases in interest rates in the US could prove the catalyst for government bonds to fall.

Meanwhile, high-yield bond markets have softened a little. The fundamentals are still supportive so we are not especially worried. Overall, levels of issuance were a bit lower and what new issues there were tended to see significant demand - so the technical position seems to be comparatively strong in Europe and the UK.

In the investment-grade part of the market, our focus remains on banks and insurance companies. Among more traditional (i.e. non-financial) corporate bonds, the market is distorted by the corporate bond buying programmes of the European Central Bank and the Bank of England. So our weightings here are likely to stay low.

24 March 2017

Fixed income: The environment has changed…

James Foster, manager of the Artemis Strategic Bond Fund, explains how he is positioning the portfolio for higher interest rates. He is favouring shorter-dated bonds and sees value in financials.

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

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

Data from 30 June 2005. Source Lipper Limited, quarterly accumulation units, bid to bid in sterling to 31 March 2017. All figures show total returns with interest reinvested.

Bond rating allocation

Bond rating allocation

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

Percentage growth (class R)

20172016201520142013
12 months to 31 March9.4%-1.1%4.8%7.9%10.4%
20172016201520142013
12 months to 31 March9.4%-1.1%4.8%7.9%10.4%
Please remember that past performance is not a guide to the future. Source: Lipper Limited, quarterly accumulation units, bid to bid in sterling. All figures show total returns with interest reinvested.

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Fixed income: The environment has changed…





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About the fund

The Artemis Strategic Bond Fund invests in bonds issued by governments and companies. It uses the coupon payments from these bonds to generate a regular income for investors, which is currently 4.0%*.

The fund aims to preserve capital in tough times and to profit when conditions are good.

  • Flexible approach: traditional bond funds tend to restrict themselves to one area of the bond market. This fund, however, invests across the credit spectrum, moving between government bonds and investment-grade and high-yield bonds issued by companies.
  • Adapts to market conditions: by owning the right bonds for each stage of the economic cycle, the managers aim to preserve capital in difficult times and to profit when conditions improve.
  • Performance through the economic cycle: since its launch in 2005, the fund has outperformed its sector average and currently offers investors an attractive yield of over 4.0%*.
  • Spreading risk: the fund typically holds between 80–100 positions and is well diversified by sector, credit type and maturity.
  • Experience: James Foster has over 20 years’ experience of managing bond funds.

* Source: Artemis, class I distribution units as at 28 February 2017.

Introducing the fund

James Foster, co-manager alongside Alex Ralph, introduces the Artemis Strategic Bond Fund and explains how they make investment decisions.

Reasons to consider

The fund may be suitable for investors looking for:

  • a regular income with potential for capital growth
  • some protection of capital in tough times
  • a highly experienced management team

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 may use derivatives to meet its investment objective, to protect the value of the fund, to reduce costs and with the aim of profiting from falling prices. 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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