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Institutions and charities

Artemis High Income Fund

All data as at 31 January 2017 except where specified
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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 I)

As at noon, 24 February 2017
Bid price (quarterly dist units)84.19p
Offer price (quarterly dist units)85.96p
Distribution yield (as at 31 Jan 17)5.8%
Underlying yield (as at 31 Jan 17)5.1%

Investment information
(class I)

Minimum lump sum investment£250,000
Ongoing charge (quarterly dist units)0.69%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 0.625% 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

Improving economic growth supported demand for corporate bonds in February. Economic data has persistently been better than expected, particularly in Europe, and rotation into cyclical sectors continued across asset classes. At the same time, concerns over protectionism began to weigh on equities as rhetoric from the Trump campaign turned into reality. So despite clear signs of a pickup in inflation, political risk meant yields only rose marginally.

As high yield bonds gained and government bonds faltered, the fund’s positioning worked well in January.

As high yield bonds gained and government bonds faltered, the fund’s positioning worked well in January. The fund is naturally short in terms of duration so performs relatively well when yields on government bonds rise. It also has a large weighting in financials which have continued to benefit both from the steepening yield curve and the improved performance of equities. During the month we took profits in some of our financial positions. We sold Standard Life and the US bank PNC at a profit. On the other side we added to Generali, an Italian insurer. New issues in high yield market were limited and our only new position was in TalkTalk (telecoms). Fears that its end markets are weakening meant the issue was priced at a big discount. We believe the dividend will be cut, however, and strong underlying cashflows support the yield. We took profits on our holding in XPO. Having benefited from the rotation into cyclical stocks, the bond had begun to price in perfection with no room for error. This is an increasingly common occurrence in credit markets.

In the UK, reports suggested that the appreciation of sterling over the month was responsible for becalming the FTSE 100. If this is correct, it means that the near-term performance of the market becomes a function of sterling’s fortunes. This is not helpful for now but looked at over the long term it will not be material. The profit warning from BT was a genuine surprise but on balance we felt that the market had overreacted and made a small addition to the holding. Direct Line is a new holding. We see the potential for further special dividends and feel that innovation and reinvestment should produce more growth than the market expects. Elsewhere, we reduced Centrica.

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 January 2017

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

Data from 9 September 2002, when Artemis took over management of the fund. Source: Lipper Limited, data from 9 September 2002 to 7 March 2008 reflects class R quarterly distribution units, and from 7 March 2008 to 31 January 2017 reflects class I quarterly distribution units, bid to bid in sterling. All figures show total returns with interest reinvested.

Asset allocation

Asset allocation

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

Percentage growth (class I)

20162015201420132012
12 months to 31 December7.8%2.2%5.4%13.8%23.1%
20172016201520142013
12 months to 31 January11.1%-1.9%6.2%12.1%22.0%
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 …





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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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The information contained in these pages should not be used or relied upon by private investors.